Consumers Getting Crankier
By George Anderson
Attention retailers and other businesses selling to consumers: Your customers are not happy.
The latest results from the University of Michigan’s American Customer Satisfaction Index show a continuing decline in consumers’ happiness with the goods and services they are receiving.
The new numbers represent the second straight decline in the quarterly report’s numbers and, according to The Detroit News, “The index’s scores for the six-month period represent its biggest drop since 1997.”
Researchers note that there appears to be a direct correlation between consumers’ unhappiness with the service they are receiving and the cost of goods and services.
Claes Fornell, business professor and director of the National Quality Research Center at the University of Michigan, told The Chicago Sun-Times, “They feel like they’re not getting their money’s worth.”
Michael Bernacchi, professor of marketing at the University of Detroit Mercy, said the situation is not likely to change in the near term. “There is a general crankiness with the American consumer. We are going to see consumer satisfaction plummeting into the future. Maybe there will be a need for a new kind of economic therapist. Maybe it will help people cope with the reality that this isn’t the economy of 10, 25 or 50 years ago. For Americans, that isn’t good news.”
Moderator’s Comment: What are the implications of the results from the latest University of Michigan American Customer Satisfaction Index for domestic
retailers? –
George Anderson – Moderator
The metric for consumers has been “value” for some time now. When consumers feel they are getting a great price on merchandise (a la clubs) they require less service. When they feel they are paying more, they expect more service. Most retailers are having to increase prices at the same time they reduce service. It’s not surprising then that there is a feeling of dissatisfaction amongst consumers – the price/value ratio has dropped.
Clearly, some stores have managed to overcome this – Pier One, Nordstrom and Trader Joe’s spring to mind – companies that offer both good value on price and good service. None of these stores have the buying clout of the mass retailers, so it is not simply a function of efficient sourcing, although that may be part of it.
It is not an impossible task to please consumers. Some of it is policy (one thing all the stores mentioned earlier have in common is an easy return policy); some of it is employee training. (I, personally, have never been ignored or treated carelessly by personnel at these stores, for example.)
Some things about this are obvious.
One thing, obviously, is that instead of hiring bright, young, motivated people like they did when I was 16, retailers now hire self-absorbed, poorly trained children with no customer skills. This has nothing to do with my being over 50, of course.
Seriously, some of the best and most consistent service in a retail store that I experience regularly is at my local Trader Joe’s. Mature, well paid staff with a genuine interest in being helpful, a knowledge of their own store, and comfortable with eye-contact, idle chit-chat, and a memory for my face that lets me know they remember me.
…Whereas my big box grocery store is impossible to navigate, devoid of personnel in the aisles, and as much a mystery to them as it is to me. Ditto my large home center, and let’s not even talk about Sears.
Some of this is a personnel issue. More of it is training and corporate attitudes. And a lot of it is poor store design that doesn’t SUPPORT a customer satisfactory experience.
The conclusions drawn from this snippet of data may be correct. However, many of the commentators have obliquely noted that despite the “quality trumps price” statements, it certainly isn’t real-world prevalent.
I’d be more interested in what the data says across gender and subdivided by age bracket. My intuition says that the needs of various gender/age groups are very different from one another. Further, that there is a need in the marketplace for retailers differentiated on price or on quality or on service. Or on two out of the three. Certainly three out of three would mean runaway success.
Let’s speculate. As America “ages,” perhaps the expectations for service levels increase with that aging group of consumers. Data point of one, I know my aged mother has much higher expectations of service than I do. And almost no appreciation for the price-service trade off….something I take almost for granted.
Data such as this indicate opportunities in the marketplace. It’s insufficient to develop anything like a business plan or make intelligent suggestions on how to capitalize.
The problem doesn’t start in the store. The problem, as usual, begins in the executive suite.
The senior managers of too many retailers are consumed by their attention to profit, gross margin, inventory turn, and earning their bonuses. Whatever’s important to senior managers will be important to the rest of the organization.
So why is that a problem? Financial and operational concerns tend to crowd out management’s attention to the actual work of the company: providing customers with good products or services, a fair value, and a satisfying shopping experience.
I have a hard time putting it into words without falling back on sports cliches: who’s the better ballplayer? The superstar who obsesses over his own stats or the rookie who loves the game he gets to play?
If you ask me, the executive suites are full of too many “superstar” types.
For every indication towards your persuasion there is an indicator to the contrary.
For example, one might think that it’s all about Wal-Mart. You know the usual price conversations we all have had. The usual wages, benefits, etc. discussions filling the media. Yet to the contrary, Costco reports sales increases with a completely different model, while at the same time, even while no one seems to notice, Wal-Mart reports disappointing sales below expectations. (Of course, one could question their expectations.)
We’ve also all heard the reports of consumer pessimism, yet in the midst of it all, home sales are at all time high levels. Explain that contradiction? I can’t.
I think there are a couple of things at play here, actually. One is, if the economy is perceived as doing well, at least 48-50% of the population and 80-90% of the media don’t want that to happen for political reasons. That has a lot more to do with this than is given credit.
Secondly, it really is not all about price, but in the absence of value, it becomes price. In that case, neither the acceptance of the lower price nor lack of value bring satisfaction. I think it’s really that simple. What that points to is an incredible amount of lost opportunity and lost loyalty.
Consumer satisfaction results are often indicative of the national mood, i.e. the results are not just reflecting consumer reaction to specific price-value-service propositions, they are indicative of how we are feeling about the marketplace in general. Today’s Gallup Poll reports that just 31% of the country believes that the U.S. economy is in good or excellent shape. There is the real source of the dissatisfaction.
The decline in satisfaction suggests that shoppers might be willing to exchange lowest price for service, civility and products that perform as advertised.
Companies who have worked to improve their efficiency may now be able to generate better margins by offering superior products, service and performance guarantees to these shoppers. As an example, offer me a reliable child’s toy that doesn’t break soon after opening, back up that quality with a performance guarantee and I will purchase from no other just to avoid the repeated disappointments.
It means retailers should get a plane ticket to Orlando and tour some Publix stores. Publix was tops in the supermarket category for the 10th straight year. Wal-Mart, in its first outing, came in lower than average. Publix scored high on quality and service; Wal-Mart scored high on price. Shoppers gave Wal-Mart supercenters good grades for price and value but low grades for quality and variety. All this should be instructive, I would think. One of the study authors said, “In the battle for customer satisfaction, quality usually trumps price. But when price gets low enough, people buy. Size and volume give Wal-Mart a great advantage in its ability to price below everyone else. Its power over suppliers makes it possible to do well without stellar customer satisfaction.” All this is very true. Yet we STILL see retailers going up against Wal-Mart on price.
Compared to 5, 10, and 25 years ago, everything is more crowded: cities, roads, planes, shopping centers, etc. Consumers are stressed as they are crowded together, forced to deal with more and more automated “solutions,” and exposed to more and more advertising, promotion, and media choices. This continues to leave an opportunity for all types of businesses that treat the customer just a little bit better, and still offer reasonable value.
The knee-jerk interpretation of this report is that customers are complaining because prices are too high in relation to the lousy service they’re given. The knee-jerk solution is to continue the price battle and lower the cost rather than increase the service. For most companies that is the easiest thing to do – the fact that it’s a retail death sentence is beside the point.
You can’t solve ecological problems (poor customer treatment by poorly trained, motivated and paid sales people) with economic solutions. When people are treated poorly no price is low enough to compensate. When companies lose the ecological battle they will also lose the economic battle. Doesn’t even matter how big they are.
I hate to say it, but Wal-Mart has driven prices so low that it has forced competitors to eliminate good service. While the consumer might be crankier about poor service, they have also put up with it. Sometimes the price of good service is more than what most consumers are willing to stand for.
I think that price plays a very big role in our perception of customer service. If we think that we are getting the lowest or best price, we expect to have less service in return. This explains Wal-Mart and the club stores not being knocked for poor service. When we shop at a regular supermarket or a mall store we expect service since we are paying top dollar for it. Unfortunately there isn’t always much difference, hence the lower price stores are continuing to increase in sales at the other store’s expense.
How can anyone possibly be surprised by this? High prices need to be accompanied by good service. Low prices too often mean low quality goods and no service. There is surely room, and demand, for both high and low prices, service and self-service. But they must not be confused. Surviving in business, and making a profit, means getting those balances right. But did no one realise that eventually customers would get sick to the teeth of being fobbed off with rubbish that has to be re-purchased at ever decreasing intervals because it is so badly made? Was it not self-evident that self-service has a limited shelf life? Why on earth would customers shop where they do not feel respected or valued and buy products about which they can get no information from ill-tempered, ill-informed and frequently ill-mannered sales staff? Retailers (and manufacturers and Wall St) really need to get real. Increasing marketing budgets to increase the badger rate without improving service and quality just won’t cut it ad infinitum.
While few people – particularly Americans – would deny the validity of the profit motive, there has to be a limit to the arrogance with which it is emphasised. And here I am talking specifically about airlines and health care providers who are more concerned with getting paid than delivering that for which they are being paid. They, too, need to look at their bottom lines and reassess how they get there. It really isn’t ALL about price.