Tue, 09 August 2022 | economy inflation customer experience CX UX
In the US, customer satisfaction is steadily declining. Not only has it decreased for three straight quarters, but it has also decreased by 5% during 2018—the biggest reduction in the ACSI's 28-year history. On a scale of 0 to 100, it is currently at 73.1 and has declined in 12 of the last 15 quarters.
The traditional remedy for reducing inflation and calming an overheated market is to raise interest rates. However, the current economic climate has unique difficulties.
However, the current economic downturn is distinct from those in the past and more complex. It is unusual for GDP and ACSI, which measure the quantity and quality of economic production, respectively, to decline in an environment with a healthy labor market. The fact that consumer spending is rising is also unusual. It not only makes up the majority of GDP, but it also has a positive correlation with rising rather than falling consumer satisfaction. But our current economy is contradictory in that way. To make matters worse, given the ACSI numbers show that inflation is not properly compensated for the deterioration in quality, especially in services, inflation is probably far greater than stated.
The traditional remedy for reducing inflation and calming an overheated market is to raise interest rates. But the current economic climate poses unusual difficulties, according to Claes Fornell, the ACSI's creator and the Emeritus Distinguished Donald C. Cook Professor of Business Administration at the University of Michigan. Prices may continue to rise if demand exceeds supply due to shortages, shipping issues, labor shortages, or other supply issues. Perhaps paradoxically, client pleasure will then be less important for company. Businesses don't need to compete heavily for customers in a shortage economy. Instead, customers vie with one another to be first in line and take advantage of the available goods.
While this is happening, certain industries are currently experiencing the opposite issue: overstocking with more inventory than the market can support. As a result, some products will have lower prices. In a shortage economy, regardless of customer contentment, strong demand due to high levels of customer satisfaction tends to boost a company's price power. In other words, pricing pressure is a result of both overstocking and declining customer satisfaction. The paradox here is that declining consumer satisfaction might assist in containing inflation, but only in industries where there are no supply issues.
Customer satisfaction has, however, decreased most dramatically in the supply-constrained industries (since 2018), notably in the labor market. Hospitals (-9%), hotels (-7%), and rapid delivery (-9%) are a few examples. Customers are less satisfied in sectors where prices have increased significantly, such as gas stations (-8%), beer (-7%), and utilities (-5%). Industries that rely less on service are at the other end of the spectrum. They have observed an increase in ACSI to the extent that they can keep clients from actually needing service. With instance, customer satisfaction for cable television is up by almost 7%, internet services by 3%, and personal computers by 3%.
Source: ACSI