How millennials are reshaping the restaurant industry

Millennials spend more on dining out than any other demographic, to the tune of $92 billion in 2016. That number is only expected to grow as their earnings increase.

So it’s no surprise that millennial tastes are reshaping restaurants, from the food they serve to the way it’s ordered. That means food trending toward natural, organic, and plant-based. Some 40 percent of millennials are reportedly taking on a plant-based diet.

While millennials eat out, they also like to order in, prompting technological changes in how restaurants take orders, accept payments, and design their websites and mobile apps.

Restaurants’ ability to meet new preferences and expectations in the last year has had a significant effect on their ACSI scores. After a drop last year, full-service restaurants rose 3.8 percent to 81. Fast food edged up 1.3 percent to 80.

But where the improvements—and the need for improvement—are most obvious is in the ACSI scores for every element of customer satisfaction.

What restaurants are getting right?

Full-service, sit-down restaurants have improved across nearly all aspects of the customer experience.

Food order accuracy remains a strong point with a score of 89, up 2 percent year over year. Restaurant staff are more courteous and helpful—another 2 percent gain to 87.

Food quality (up 4 percent to 87) and food variety (up 4 percent to 86) show strong gains in areas that cater to millennial preferences for fresh, quality ingredients and customization. Beverage quality (86) and variety (83) are also much improved this year.

Full-service restaurant layout and cleanliness rates well at 86 and continues to exceed the fast food industry (84).

Fast food restaurants are right behind the full-service category in highly accurate order fulfillment, rising 1 percent year over year to 88. It remains by far the top-rated aspect of the fast food experience. Staff do a good job of serving customers (85) and food quality rose 1 percent to 85.

The element that improves the most is also the fast food industry’s reason for being: speed of check-out or delivery. Service speed is up 2 percent to 84.

Where restaurants have room to improve

Food-to-table service from full-service restaurants is quicker (up 2 percent to 83), but lags fast food check-out and delivery speed (84).

The only element to weaken for the full-service category is website satisfaction (83). This should alarm restaurants as online ordering continues to gain traction with customers and off-premise dining becomes more critical for boosting sales.

Unlike the full-service segment, fast food beverage quality has not improved (84) and beverage variety is somewhat lacking (79 compared to 83 for full service). Food variety is at the lower end of the spectrum, steady at 81. Fast food website satisfaction, unchanged at 82, is close to that of full-service restaurants (83).

Restaurants that are getting it right

Among both full-service and fast-food restaurants, several brands improved significantly over the last year. That can be attributed at least in part to the various improvements they undertook, many of which cater to millennial tastes.

Red Robin jumped 8 percent to an ACSI score of 79. In the last year, it rolled out a veggie burger. It tested a new delivery-only concept that operates without a traditional storefront in downtown Chicago. It embraced digital ordering, allowing customers to place orders with a specific pick-up time, prepay, and customize burgers just as they would at a physical Red Robin location.

TGI Friday’s, up 4 percent year over year to a score of 79, is taking delivery to a new level by delivering alcohol as well as food—a new concept for restaurants. It also partnered with Beyond Meat to offer its plant-based Beyond Burger. It has invested heavily in technology, from Alexa skills to virtual bartenders.

On the fast food side, Pizza Hut, which jumped 5 percent to a score of 80, is also testing beer and wine delivery, and might soon deliver pizzas with autonomous delivery trucks. It also rolled out a new loyalty program that rewards online orders.

Millennials have been blamed for ruining everything from running to napkins. Their preferences are certainly reshaping industries. But, at least in the case of restaurants, their desire for choice and customization; fresh, quality ingredients; and a better ordering experience on websites and mobile apps is moving both full-service and fast food restaurants in a positive direction.

Customer satisfaction with hospitals grows as health care sector shifts

One word defines health care right now: consolidation.

Pharmacy benefits managers (PBMs) are merging with insurers. United Health Group led the charge a few years ago, buying Catamaran. Now CVS is buying Aetna and Cigna is buying Express Scripts. Walmart is in talks to buy Humana. Some see this as motivated by the potential for Amazon to leap into the health care space; the major players are joining forces to ensure they’ll be able to compete.

But the joining of PBMs with insurers could have an effect on hospitals as well.

UnitedHealth bought Surgical Care Affiliates to expand into primary and urgent care in ambulances, and picked up a physician group, moving closer to direct delivery of medical care. CVS and Aetna plan to add community medical clinics to their repertoire. Walmart already operates retail health clinics and has said it would begin offering lab-testing services in some stores.

The $18 billion urgent care center space is expected to grow nearly 6 percent in 2018, building on the more than 7,600 urgent care centers in the U.S. as of June 2017. The number of centers in 2017 was up nearly 10 percent over 2015.

The surge in clinics could be the reason that customer satisfaction with emergency room services jumped 6 percent since last year, to an ACSI score of 73.

That was the most dramatic change in the health care and social assistance sector, and drove the 1.3 percent increase in customer satisfaction with hospitals.

Inpatient hospital care saw a 1 percent rise to an ACSI score of 77. The gains in ER and inpatient care helped offset a decline for outpatient care, which ebbed 3 percent to 78.

Patient satisfaction with ambulatory care (office visits to doctors, dentists, optometrists, and mental health professionals) held steady at 77 for the third year in a row.

Among patients 51 years and up, satisfaction with hospitals was much higher, at a score of 80, than among those 18-50 years old, where it stood at just 72. The difference in satisfaction between the two age groups was most pronounced in outpatient care and emergency room services, where ACSI scores among those 51 and up were 10 points higher than scores for those 18-50.

It will be interesting to see the effect that continued growth of urgent care clinics will have on ER perception moving forward. And when Amazon, along with its collaborators JPMorgan Chase and Berkshire Hathaway, does make moves in health care, it will be anyone’s guess how the health care and social assistance sector, and patients’ satisfaction with its services, will respond.

UPS tops FedEx in customer satisfaction, as Amazon appears on the horizon

Amazon overshadows many industries, as we saw last month in the retail sector. Now, consumer shipping, long the beneficiary of all those Amazon orders, is bracing for a future in which Amazon makes its own deliveries.

The Wall Street Journal last month reported that Amazon is planning to launch “Shipping with Amazon,” a delivery service for businesses shipping to consumers. Of course it would take years for Amazon to build a parcel delivery network at the scale of United Parcel Service (UPS) and FedEx, but even the specter of Amazon should be enough for the established players in the shipping industry to redouble their efforts in serving customers.

Where do they stand right now?

Customer satisfaction with consumer shipping was stable at an ACSI score of 81 (out of 100), but UPS jumped into the lead at 82, growing 1 percent over 2017. FedEx fell 1 percent to 81. The U.S. Postal Service’s Express and Priority Mail business climbed 1 percent, but remains a distant third place at 76.

Customers gave top marks to shippers for delivering packages in good condition (88) and making it easy to track shipments (86). Customers who visited a post office or a UPS or FedEx store feel that service staff members were slightly less courteous and helpful this year (85), but all other customer experience benchmarks remained the same.

It might seem easy to write off the U.S. Postal Service’s Express and Priority Mail business, which remains well behind the category’s leaders in terms of overall customer satisfaction. But it’s actually tied with FedEx in customer loyalty and has a lower percentage of customer complaints. UPS had the best scores in the industry for each of those measures.

With Amazon dipping its toes in the shipping space and, according to the Wall Street Journal, threatening to undercut UPS and FedEx pricing, the shipping giants can only rely on their established infrastructure so long. Investing in customer service could continue to set these companies apart.

Drug store mergers heat up as retailers defend against the Amazon threat

Among retailers, health and personal care stores were one of the bright spots in our latest Retail Report 2017.

Just like supermarkets, health and personal care stores climbed one point to an ACSI score of 79. While that doesn’t match the 82 of internet retailers, it’s a high score, and the improvement points to the results of both M&A and preparations for Amazon to enter the space.

But that vote of confidence from customers is just the prelude to a shake up that the industry’s many mergers are creating.

The leaders shed points, but still lead

Kmart pharmacies and Kroger were tied at a score of 80 at the top of the health and personal care industry. However, both saw their ACSI score fall in 2017, with Kmart pharmacies shedding 4 points and Kroger down 1 point. Kmart pharmacies did show significant improvement in service quality, and both brands improved in meeting customer expectations.

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CVS was right behind the leaders at a company-best 78. It was the most improved in the category, gaining 2 points, and one of only two large chains to improve over 2016.

Acquiring Target pharmacies may have boosted CVS’s customer satisfaction scores. When dividing CVS’s score into CVS and Target pharmacies, Target stands at a score of 80, while CVS sits at 77.

The health care retailer’s possible merger with Aetna is suspected to be a preemptive move to counter the threat of Amazon, which may begin selling prescription medicine. Whether this merger will boost customer satisfaction – or even go through – remains to be seen.

Rite Aid split among Albertsons and Walgreens

Rite Aid, which fell 1 point in 2017 to a score of 77, is in the middle of being purchased.

Walgreens is snatching up 1,932 Rite Aids (it tried to buy all of them before antitrust scrutiny led to a scaled-back deal). And now Albertsons plans to buy the remaining 2,500 Rite Aids, further expanding its footprint after merging with Safeway in 2015.

It seems many of the health and personal care stores toward the bottom of the ACSI rankings are banding together in hopes of better serving customers and getting ahead of Amazon’s potential entrance in the market.

Walgreens gained a point in 2017 to tie Rite Aid at 77. Safeway pharmacies was just a point higher at 78 after plummeting five points from last year, a drop of 6 percent. Declines in customer loyalty and perceived value contributed to the fall.

Perhaps the many mergers and acquisitions will give these stores more resources to improve customer satisfaction.

The elephant in the room

In the end, M&A in the health and personal care space, as well as the improvements in service quality and meeting customer expectations, are all about Amazon. The potential for the dominant internet retailer to enter the space and push out any and all competitors has many companies making big moves to shore up their ranks.

If Amazon steps into the space, a focus on customer satisfaction will be critical to winning customer loyalty and dollars.

Customer Satisfaction Challenge Ahead for Charter as TWC, Bright House Phase Out

Just one year ago, Time Warner Cable (TWC) tumbled to last place for customer satisfaction among 300+ companies in the ACSI. Along with TWC, Comcast showed the biggest ACSI loss among subscription television providers, a situation that has turned around in 2016. This year’s gains for Comcast and TWC (14% and 16%, respectively), come close to reversing two years of losing satisfaction, but neither company breaks out of the bottom quartile of the ACSI. While Comcast failed to nail down a marriage with TWC, Charter Communications is tying the knot, which will bring an end to the TWC brand.

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ACSI results show Charter’s customer satisfaction fluctuating, now down 6% to 60 as the company begins its stint as the second largest U.S. cable operator following acquisitions of TWC and Bright House Networks. Among broadband players, Bright House at 66 is a cut above most. Nevertheless, like all cable companies, Bright House lags behind the fiber optic leaders of the pay TV industry, Verizon Fios (70) and AT&T U-verse (69), as well as satellite operators DIRECTV (68) and DISH Network (67). As a group, cable companies bring up the rear, but the range of scores is broad—from the above-average showing of Bright House and Cablevision to the last-place performance of Mediacom (54).

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Mergers overwhelmingly dampen customer satisfaction in the short term, which could spell trouble for Bright House customers as the brand phases out and combines with Charter. For Charter, the challenge will be keeping satisfaction levels from falling further as it takes on a bigger slice of the market.

Bloomberg.com: So Long Time Warner Cable: Charter to Retire Maligned Brand »

Charlotte Observer: Customer Satisfaction Improves for Cable, Internet Providers »

CRM Buyer: Pay TV Firms Eke Out Tiny Gains in Customer Satisfaction »

Marketing Daily: Telecom Customer Satisfaction Improving, Slightly »

Multichannel News: Cable Stops Slide But Remains in ACSI Cellar »

Philly.com: Comcast Service Ratings are Better, But Still Low »

Yahoo! Finance: New Customer Service Survey Says Comcast is No Longer the Worst »

Smartphones 2016: It’s a Galaxy and iPhone Universe

When it comes to pleasing consumers, the smartphone market is essentially a two-horse race, with Apple and Samsung running nearly neck-and-neck for the past two years. In 2014, Samsung gained an advantage in ACSI overall, posting 81 on a 0-100 scale to Apple’s 79, but the two market leaders deadlocked the next year.

Results from a recent report by the American Customer Satisfaction Index show Apple inching ahead to grab the customer satisfaction lead in 2016, propelling the cell phone industry average up to 79 (+1.3%). Lenovo’s Motorola Mobility comes in a distant third at 77 (-3%).

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Drilling down to the brand level reveals a preponderance of Samsung and Apple devices at the top, led by Samsung’s Galaxy Note5 at 86. Apple’s iPhone 6s Plus is a mere point behind at 85, while two more Galaxy phones clock in at 84 (S6 edge+ and Note 4). Altogether, a dozen Apple or Samsung models score above the industry ACSI average of 79, with only Motorola’s Moto G penetrating this group at 81.

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In general, phones with bigger screen sizes are more satisfying to users. The top four devices in 2016 sport displays that range from 5.5 to 5.7 inches. Among the newest iPhones, Plus models do better than their base versions (iPhone 6s Plus and 6 Plus edge 2 points ahead of 6s and 6, respectively). There are exceptions; for example, the Galaxy S III (4.8-inch display) does quite well with an ACSI score of 80. This older Samsung model ties Galaxy S6 and nudges past S4, S5, and Grand Prime (screen sizes of 5.0 to 5.1 inches).

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CNET.com: Apple’s Only Thiiisss Much Better Than Samsung in Customer Satisfaction »

Investor’s Business Daily: Samsung Phones Top Apple iPhones in Customer Satisfaction »

SlashGear: Galaxy Note 5 Beats All Other Phones in Customer Satisfaction Index »

Priceline Is Most Appealing Online Booking Site

Consumers respond well to naming their own price as online travel agency Priceline surges 8% to grab the lead in the tightly grouped Internet travel service industry. While there has been considerable consolidation among online booking sites, many continue to operate as separate brands. With an ACSI score of 81, Priceline tops the three big names under the Expedia umbrella despite smaller gains for Expedia-owned Travelocity (+4% to 78) and Orbitz (+3% to 77). Nearly lockstep with its other major brands, Expedia’s namesake booking site holds steady at 77.

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Smaller websites, grouped together as “all others,” tend to place at or near the top of the Internet travel industry, which makes Priceline’s ascendency in 2016 noteworthy. Nevertheless, the range of scores among all travel sites is typically quite narrow and the industry overall suffers from lack of differentiation. This year, the aggregate of smaller websites straddles the Expedia-Priceline divide with a score of 79 (+1%), perhaps reflecting the group’s conglomeration of brands that include Expedia’s Hotels.com and Priceline’s KAYAK.com and Booking.com.

The real competition for online travel agencies may well be the websites of hotels and airlines. According to 2016 ACSI data, hotels offer a better online experience than Internet travel agencies. Airline websites, meanwhile, are going head-to-head with Internet travel sites, matching the online industry’s overall customer satisfaction level.

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Both airlines and hotels are working harder than ever to boost loyalty and encourage direct booking. While online sites bring customers to these industries, the commissions they charge reduce net revenue per customer. Given the strong website satisfaction scores for both hotels and airlines, the convenience of one-stop shopping alone via online travel sites may not be enough to keep customers away from direct booking.

Travel Pulse: Priceline Is the Most Satisfying to Travelers, According to Study »

ACSI: Internet Travel Companies Outdo Airlines, Hotels »

Would Guests Prefer Starwood Under Marriott Umbrella?

The merger of Marriott International and Starwood Hotels & Resorts would create the world’s largest hotel operator by room count, but would customers win if the merger completes this summer as planned? Marriott has an undisputed record of above-average guest satisfaction in the American Customer Satisfaction Index, occupying the top tier among hotel chains for over a decade. In 2016, Marriott (ACSI score of 80) places a close second to Hilton (81), and its JW Marriott luxury offering leads among brands at 85.

Marriott’s latest move—adding Starwood’s 10 brands to its existing array of 19—could help stabilize the more uneven ACSI performance of Starwood. Or, the merger could put downward pressure on Marriott’s strong customer satisfaction given the pitfalls that often come with blending operations. ACSI data show that most mergers, at least in the short term, tend to depress customer satisfaction. Looking at Starwood’s track record in the ACSI, the company has at times rivaled Marriott for guest satisfaction, but more often Starwood has lagged behind by as much as 6 to 7 points.

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While most Marriott brands pass the threshold for superior customer satisfaction (score of 80 or higher), some show room for improvement—especially AC Hotels, which scores much lower at 74. By contrast, the lowest-rated Starwood brand, Sheraton at 78, outpaces AC Hotels by a significant margin. Americans may be less familiar with the AC name, however, as Marriott entered a joint venture to operate European-based AC Hotels in 2011. The brand came into the U.S. market in 2013, with the first AC Hotels by Marriott opening in late 2014.

As reported by Bloomberg, the Marriott-Starwood merger hit a bump this week, with a lawsuit by hotel owners in Chicago and New York regarding a possible violation of exclusivity rights.

Skift: Ranking the Big Hotel Brands and Loyalty Programs by Customer Satisfaction »

Travel Pulse: ACSI Report Finds Hotel Guest Satisfaction Down in 2016 »

Retail Sector Retreats to Long-Term Shopper Satisfaction Levels

ACSI’s February report on the retail sector shows customer satisfaction down 2.6% year over year for the 2015 holiday season, as consumers may be looking for more in their shopping experiences. Shopper satisfaction overall hit a high mark two years ago amid a post-recession economy where businesses were trying harder to please customers.

As recovery settles in, that honeymoon is over and five of six retail categories return to customer satisfaction levels that align with long-term ACSI averages. While most retailers show ACSI declines compared with 2014, consumers continue to prefer the online shopping experience.

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Chicago Tribune: Retail Survey: Customer Satisfaction Has Fallen Since Recession ‘Halo Period’ »

CNN Money: America’s Most Hated Retailer Is … »

Drug Store News: ACSI: Walgreens, CVS Tops in Customer Satisfaction »

Houston Chronicle: Customers Name the Best and Worst Grocery Stores in America »

Rochester Democrat & Chronicle: Wegmans Rated Top Retailer in Customer Satisfaction »

Web Retail: Selection and Checkout Speed Clicks With Customers

Brand names, ample selection, and quick payment makes Internet retailers hard to beat compared with brick-and-mortar stores. While the 2015 holiday shopping season proved tough on customer satisfaction across the entire retail sector, Web retailers overall remain pacesetters in the American Customer Satisfaction Index.

In February’s ACSI Retail report, Internet retail dips 2.4% year-over-year for 2015, but still leads the sector with an ACSI score of 80 on a 0-100 scale. At 77, specialty stores like pet suppliers, book sellers, or wholesale clubs give Web retail its biggest challenge, but department and discount stores, supermarkets, and drug stores all trail far behind with subpar customer satisfaction levels (73 to 74).

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The top draw of online shopping for customers is an easy and speedy purchase process (ACSI benchmark of 88). Meanwhile, shoppers lining up in traditional stores may be tapping their heels in frustration. Department and discount stores fare worst when it comes to checkout speed (70), followed by supermarkets (72). Specialty retailers are more efficient at ringing up sales (76), but still lag the Internet for checkout by a yawning 12 points. Web retail also has a strong advantage over brick-and-mortar when it comes to merchandise variety and selection, including brand names (84).

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Traditional stores, however, are closing the gap to Internet retail through the Web channel. Across the four brick-and-mortar categories, website satisfaction ranges from 78 to 81, which is comparable to the overall satisfaction score of 80 for Internet retail.

Call centers also represent a touch point where traditional stores can match or even beat e-tail. ACSI data show that the least satisfying aspect of the Web retail experience is customer support (77), which includes live chat, call centers, or help pages. Specialty retailers and drug stores offer a personal touch that exceeds Web retail by way of courteous and helpful staff and smoothly operating call centers (benchmarks ranging from 79 to 83).

On the other hand, department and discount stores fail to gain any advantage over online retail via either face-to-face customer service (77) or call centers (75). Moreover, department and discount stores overall provide the least satisfying customer experience among the four brick-and-mortar groups—a situation that does not bode well for an industry already under siege from the explosive growth of Web retail.

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ACSI Retail Report 2015 »

Internet Retailer: Amazon Again Leads in Shopper Satisfaction, Though Its Rating Slips »

Marketing Daily: Amid Declining Satisfaction, Amazon, Nordstrom And Trader Joe’s Stay Strong »