By Stephen Hampshire, Client Manager, TLF Research
The UK Customer Satisfaction Index
If you want to increase sales – improve customer satisfaction!January 2012
Based on a representative sample of 26,000 adults surveyed over the internet, the Institute of Customer Service presents the latest UK Customer Satisfaction Index (UKCSI) which is the national measure of customer satisfaction for UK organisations. The survey is carried out by The Leadership Factor on behalf of the Institute of Customer Service.
Customer satisfaction remains stable for the UK as a whole. While there have been no major shifts since July 2011, there is a slight trend towards more differentiation in performance across sectors. In other words, the sectors with the highest scores have tended to improve and those with the lowest scores have decreased in satisfaction.
The top 10
85 organisations achieved a customer satisfaction index (CSI) over 80 (of the 186 organisations with enough responses for a CSI); 20 organisations achieved over 85. For the first time an organisation has achieved a CSI over 90 – Amazon has made an extremely successful entry into the UKCSI. The 10 highest scoring organisations are:
Marks & Spencer food (87)
Ambulance Service (87)
First Direct (86)
John Lewis (86)
Fire Service (86)
Virgin Holidays (85)
SAGA Holidays (85)
Marks & Spencer non-food (85)
Focus on retail - better customer service drives sales and market share
The two retail sectors consistently top the UKCSI league table, and at the end of 2011 they increased their lead at the top. These are both very competitive consumer environments, where companies must compete to satisfy customers in every experience or risk losing them to a competitor. So is this how it worked out in the crucial pre-Christmas trading period? At the time of writing, most of the retailers covered in the UKCSI have released Christmas trading sales figures1, and there are some remarkable correlations with customer satisfaction.
Figure 2 shows the customer satisfaction index of each retailer on the vertical axis and the extent of its sales growth, or decline on the horizontal. You can see, for example, that Amazon had the best customer satisfaction (92) and the best sales growth (20%1), whilst Comet posted the biggest sales decline (-14%) and was well adrift of most retailers at satisfying customers with a CSI of 71.7. Based on all the data and illustrated by the red ‘best fit’ line, the correlation between customer satisfaction and sales is .63. It must be emphasised that a correlation of .63 (correlations are on a scale of 0 to 1), is considered to show a very strong relationship between the two variables. It is particularly noticeable that the four companies with the lowest satisfaction (and the lowest three are 10% below the sector average) have all suffered serious falls in sales. We should also point out that the UKCSI survey took place right in the middle of the Christmas trading period. The only outlier is Primark, where the attractiveness of low prices outweighed customer service for their target market. (Along with Amazon, Superdrug and Matalan, Primark achieved one of the highest scores for customer satisfaction with price).
Figure 2: The impact of customer satisfaction on sales
Does customer service make a difference?
Some people might argue that in an area like non-food retail it’s all down to product and price. If you stock the products customers want (e.g. the most fashionable clothes or the latest technological gadgets), and sell them at the most competitive prices, you’ll achieve sector leading sales and market share even if your customer service isn’t the best. So does customer service matter? The answer is emphatically yes! Figure 3 shows the relationship between customer service and sales growth and the correlation comes out at a remarkable .66, slightly stronger than for overall customer satisfaction. This is great news in terms of building a sustainable competitive advantage because your competitors can copy your products and match your prices, but it is much more difficult for them to keep up with your investment in developing the kind of employees and culture that deliver great customer service.
Figure 3: Customer service and sales growth
Where do we get the customer satisfaction data from?
Every 6 months a representative sample of 26,000 UK adults take part in a web survey. The questions that make up the index are based on the factors that are most important to customers - in other words the strongest drivers of their satisfaction, or dissatisfaction with a customer experience. The overall CSI is based on customers’ 20 most important requirements and it’s completely accurate because the relative importance of the factors was updated in 2011. The full list of customer requirements can be seen on the website, HYPERLINK "http://www.ukcsi.com" www.ukcsi.com
The score for customer service is based on a relevant subset of the 20 customer requirements including factors such as ‘being kept informed’, ‘handling enquiries’, ‘handling complaints’ and ‘staff attitude’.
What about the supermarkets?
This is an incredibly competitive sector and it displays a much narrower range of relative performance for both customer satisfaction and sales growth/decline than those we have seen in the non-food segment. For business performance, we have selected change in market share as the indicator since completely comparable figures are available from Kantar2. When ranges are narrow, correlations are always smaller, but the chart does show that, although the changes in relative market share are small, the winners have higher customer satisfaction than those losing market share. It’s also instructive that the 2 leaders, Aldi and Waitrose, have very different business models. This shows that it’s not about being the cheapest, or having the best products, but about delivering whatever your target customers see as the best possible customer experience.
Figure 4: Supermarkets’ CSI versus market share changes
The leader of the pack
Amazon has shown itself to be extremely good at meeting the needs of its customers. They are the first organisation since the start of the UKCSI to achieve an overall CSI over 90 (with over 25% of their customers scoring them at 100). Why are they so good at satisfying customers?
Amazon performs very well because it creates a consistently excellent experience for its customers, scoring particularly well for the attributes “quality and efficiency”, “timeliness” and “ease of doing business”.. Importantly, while it creates few problems for customers, it also resolves customer complaints efficiently if things do go wrong. Only 6% of customers had a problem with Amazon, and they were extremely happy with the way it was handled. Amazon customers score an average of 9 out of 10 for the handling of their complaint and 9.3 out of 10 for the outcome of their complaint.
We asked customers to pick three adjectives that best describe their experience with an organisation. Within non-food retail the most commonly chosen word was “easy”. As shown in the word cloud below, the most commonly chosen words (bigger) relate to a mix of two basic needs—speed/efficiency on the one hand, and staff attitude on the other. By getting the blend of these right for its customers Amazon is able to deliver consistently excellent customer satisfaction within an efficient business model.
Figure 5: Helpful staff make shopping easy
Changes to UKCSI—a multichannel focus
In 2011, the Institute of Customer Service completed the results of a major project to re-measure the priorities of customers in each of the 13 sectors included in the UKCSI. This research showed that, for the most part, priorities were much the same as established by the original research in 2006.
What had changed was the importance of the internet, and multi-channel service in general, for organisations operating in many sectors. Whilst customer priorities are largely consistent across channels, and indeed across sectors, it was felt that the growing importance of multichannel service merited a change to the UKCSI questionnaire.
The UKCSI questionnaire now uses a set of questions which are applicable to all experiences, followed by a smaller set of questions which are specific to the channel used by each customer in their interaction. This allows us to incorporate web-only businesses, such as Amazon, and also to study how effectively organisations are managing the customer experience through all their channels.
Across the UKCSI as a whole, there is a clear pattern for customers to be happiest either when dealing with staff face to face or with a web transaction. Phoning organisations, and particularly writing to them, is a much less satisfactory experience.
Figure 6: Some channels deliver a better customer experience than others
This overall trend shows some differences at a sector level (see the chart below). In particular, this highlights that there is adverse customer satisfaction when people deal with some sectors in writing (particularly Public services – local, but Transport, Telecommunications and Banks and building societies also show a significant drop in performance through this medium).
Figure 7: Big variations in channel experience by sector
The interesting thing about this new data is that it highlights some great opportunities for organisations to improve customer satisfaction. Companies across diverse industries such as First Direct, BUPA and O2 have shown their call centres can deliver great customer service, so it should be possible for all organisations.
Attitudes towards energy providers
Each time we run the UKCSI we use a section of questions which change to reflect a topical question of interest. This time we explored the attitudes of customers towards energy providers in the light of fluctuating energy prices.
Most customers do not think they are more likely to switch
As a general rule, customers tend to overestimate their propensity to switch. Even so, relatively few customers think that rising prices have made them more likely to switch energy provider.
Figure 8: Customers are reluctant to switch energy provider
Just less than half (47%) of the customers we interviewed said that they intended to monitor other providers’ tariffs with a view to switching, but over 80% said that they intended to keep a closer eye on their provider’s bills.
The importance of customer service for energy providers
We asked customers whether customer service has become more important for them when choosing an energy provider, and the majority think that it has.
Figure 9: Customer service is important
68% of customers said that they would consider switching energy provider as a result of poor customer service, but only 26% have ever done so.
Customer attitudes to tariffs and switching
Finally, we asked three questions about customers’ attitudes to the energy market, on a scale of 1 to 5 designed to measure their strength of agreement with three statements. The mean scores are shown in the chart below.
Customers tend to agree with all three statements, but are most supportive of the idea that they want a provider that is easy to deal with and does not try to obfuscate tariffs. This is similar to the retail word cloud shown in Figure 5, and shows that ‘ease of doing business’ is a very important customer requirement across many sectors.
Figure 10: Please make it easy for me!
1. Sales growth statistics refer to like for like sales over the Christmas trading periods of 2010 and 2011 and are derived from the announcements of the individual companies. The timescales used by companies may differ slightly but all refer to UK sales apart from Carphone Warehouse and Amazon who only released European figures. Some retailers covered by the UKCSI have not made announcements at the time of writing. There are useful, but not comprehensive compilations of Christmas trading figures on http://frontofstore.org and on www.bbc.co.uk/news/business-16429005