Airlines have a problem: The in-flight experience.

Airlines are ascending.

Following a 2.7% drop in 2018, airlines rebounded in passenger satisfaction this year, climbing 1.4% to an ACSI score of 74 (out of 100), per our latest Travel Report.

Several airlines experienced improvements in customer satisfaction. Most notably, the newly minted leader, Alaska, up 1% to an ACSI score of 80. Delta, which finished first among legacy airlines, also climbed 1% to 75.

A majority of experience benchmarks remained unchanged and in good standing. Customers found solace in the check-in process (82), the ease of making reservations (81), the timeliness of arrival (80), and website satisfaction (80).

Customers were even more impressed with mobile apps, which debuted on the list at 82 for both quality and reliability.

Given these scores, you might think airlines would be much higher on the customer satisfaction scale. Unfortunately, the industry left much to be desired in arguably the most important part of travel: the flight itself.

The in-flight experience is a problem

This year, four new metrics were used to track some of the most problematic aspects of travel. The results were revealing.

The availability and size of overhead storage earned an ACSI score of 73, as did both the quality of complimentary and premium (purchased) food and beverage. The quality of in-flight entertainment received an even lower mark at 71.

Seat comfort – or lack thereof – remained the worst part of flying, with an ACSI score of 69.

It’s clear that passengers are yearning for a better flying experience. They don’t have much overhead space, their seats are cramped, and the food and entertainment could be better. Fortunately, some airlines are listening.

Airlines attempting to make flights more comfortable

Delta customers appreciate the in-flight amenities they receive on the bulk of mainline aircrafts. The airlines offer seatback screens, USB ports, and Wi-Fi. But Delta isn’t alone.

Although United, like American, is in the process of transitioning away from seatback screens, it’s making changes to accommodate its passengers in the short term.

In the past, only domestic business class passengers on United flights could access DirecTV for free. Economy passengers had to pay a small fee, but that’s no longer the case. As of January 30, 2019, all passengers will have free access to the service.

United is also looking to improve the in-flight experience through a new partnership with skincare brand Sunday Riley, as three cabin-specific amenity kits will be made available to United passengers.

“Sunday and her team really took the time to understand how travel and the aircraft environment affects our customers and formulated an in-flight remedy that complements their journey with United from beginning to end,” said Mark Krolick, United’s vice president of marketing, per the Airline Passenger Experience Association (APEX).

In an attempt to improve in-flight entertainment, American Airlines is making it easier for passengers to listen to their Apple Music. Those with subscriptions can now use complimentary Wi-Fi on all American Airlines domestic flights to access their music.

Passengers might be part of the problem

It’s true that flights have become less comfortable over the years. However, airlines aren’t the only ones to blame. Consumers are also at fault to an extent.

According to an MSN poll, 51% of Americans noted price of the ticket as their top priority when selecting which airline to fly. Only 6% of the 209,000 people polled listed comfort as their No. 1 priority.

“The reality is that people have proven to the U.S. airline industry time and time again that, at volume, they prefer the lower advertised price regardless of how many add-ons they have to pay for,” said Vinay Bhaskara, a senior business analyst with industry publication Airway.

If customers are going to purchase tickets based on the price, they’re essentially saying they’re willing to forego comfort for cost-cutting. That’s part of the problem.

Voice your concerns

If passengers are looking for improvements to airlines’ in-flight experience, they have to speak up. Some customers do that more frequently than others, and it’s paying off.

Nearly a third of business travelers have filed a complaint with an airline as opposed to only 11% of leisure passengers. Yet, business travelers who complain are still far more satisfied than the average leisure traveler with a complaint, posting an ACSI score of 78 compared to 73.

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You might be surprised by these numbers, but it makes sense.

Business travelers travel more frequently. They have more experience and a better level of expectations. They know the lay of the land, and they have a greater sense of how things are supposed to operate (which is while they’ll likely speak up if things are off).

Leisure travelers, on the other hand, may fly once a year and not be as comfortable with the process. They have different expectations, and while they might get frustrated when things don’t go according to plan, they’re less likely to voice a concern.

If customers really want more, they have to give airlines a greater reason to change. Given the current consumer spending habits, however, this trend will likely continue.

Everything you need to know about customer satisfaction

You might have an idea about customer satisfaction, but do you really know what goes into satisfying customers? Do you understand the difference between customer satisfaction, customer experience, and customer service? What about the correlation between employee satisfaction and customer satisfaction?

If you’re hesitant about any of the above answers or have a thirst for knowledge, have no fear: We’re going to answer all of the above and more in this blog post, including some commonly asked questions about our data. We are, after all, the American Customer Satisfaction Index (ACSI).

What’s the difference between customer satisfaction, customer service, and customer experience?

Customer service is an element of the customer experience, and both can contribute to overall customer satisfaction.

To break it down, let’s say you’re a customer shopping in a grocery store. An employee helps you locate chips in aisle three, then a cashier helps you during the checkout process. Both interactions are customer service elements of the customer experience, but the overall satisfaction is more than that: It includes the cleanliness of the store, the price you paid for those chips, etc.

Sometimes, customer service doesn’t factor into customer satisfaction or customers provide their own services. For example, shoppers may use the self check-out option instead of speaking directly with a cashier.

Customer satisfaction can also occur with a specific product. For example, how did those chips you bought taste? Were there enough in the bag to justify the cost?

While nuanced and somewhat intertwined, satisfaction, service, and experience play different roles.

Does employee satisfaction impact customer satisfaction?

The correlation between employee and customer satisfaction is closer than you think. Both are part of the value chain. For companies, customer satisfaction starts with the company’s products or services. Drilling down further, there’s the quality of the employee’s service or quality of the manufacturing. And all of that flows back up to investors; good products/services mean more customers and more money.

The happier your employees are, the better service they’ll provide, which means you’ll have happier customers. If customers are happy, they’re more likely to be repeat shoppers and generate more revenue for the company. This leads to higher stock prices, bigger returns on investment, and happier shareholders. And (the smart companies) can turn that capital around to give employees bigger benefits, which in turn makes them, and their customers, even happier.

Basically, satisfied employees equal satisfied customers, which equals satisfied investors.

However, the opposite happens, too. If employees aren’t as happy, then they may not treat each other or customers as well (compared to competitors). Quality of products and services may go down, causing stock value to drop, then there’s less cash to utilize.

It’s the circle of life.

What are a few things any company can do to improve customer satisfaction?

The secret is: There’s no secret. Because every company and situation is different, there’s no “one thing” companies can do to improve customer satisfaction. However employee satisfaction is the keystone of any positive customer experience, as explained above.

A common denominator among companies with low customer satisfaction scores is they typically have unsatisfied employees. Mismanagement is another theme. If products or services were performing well and then changes to business strategy impacted the performance, that can influence customer satisfaction.

Greed is another pitfall. Specifically, profit-taking during mergers and acquisitions. Often the first step to please shareholders is to cut costs, which typically starts with labor costs and downsizing. That means there may not be enough employees to help, which means service can suffer. Even if staff provide high-quality service, there may not be enough bodies to handle requests, which then causes satisfaction to dive.

That’s the exact opposite of what should be done. Investing in employees can create happier customers, which means they’ll stick around and keep their money in your pockets.

Bottom line: Consider your employees as you consider your customers, and satisfaction is likely to follow.

Is customer satisfaction a bigger priority or focus for companies now?

In 25 years since the ACSI was founded there have been shifts in customer satisfaction; however, there haven’t been many changes in the last decade or so.

Customer experiences have a greater portion of businesses’ attention, particularly on the end-to-end experience. We’re starting to see a growing interest around metrics, which help companies determine where best to allocate resources to improve their operations or products. But just because a business collects customer satisfaction data, doesn’t mean they will make good decisions based on it.

What are some major changes in customer experience?

We’re living in a digital world. Now, companies need to be concerned about their online presence, creating mobile-friendly options, and the power of the internet. Companies need a good website and the ability to do business online, whatever that business may be. For retail, that means having clothing for sale; for travel, that means booking flight reservations efficiently; for banking, that means setting up automatic bill pay options.

Finding that balance between digital and brick and mortar is the latest obsession in satisfying customers. Companies can set themselves apart by customizing the experience to meet individual needs. That may mean having store pickup or a great website. Offering different incentives to keep customers coming back can help improve the overall experience.

The digital experience is the heart and soul of transformation: Companies need to understand different customers’ needs and interests and develop a range of options to accommodate.

While customers are more self-sufficient in this digital world and that tends to increase customer satisfaction — more service required, the lower the customer satisfaction — there is a caveat: If there’s a problem, all of this goes out the window.

If customers run into a snag on the website or have trouble getting answers in a live chat, it can negatively impact overall customer experience. In fact, call center satisfaction tends to rate at the bottom of most industry benchmarks.

What goes into the ACSI’s measurement and methodology?

 The ACSI’s process has been extensively tested for over 25 years. While we can’t reveal all the details, we use an econometric model developed at the University of Michigan’s Ross School of Business. It factors in customer expectations, perceived quality, perceived value, complaints, loyalty, retention, and more criteria.

There are also specific benchmarks relevant to each industry’s products and services, whether that’s website satisfaction, battery life for cell phones, seat comfort for airlines, or speed of service for restaurants.

For more on the science that goes into measuring customer satisfaction, check out this chart on our website.

 How are companies selected for the ACSI’s reports?

The ACSI conducts its syndicated research independent of any of the companies measured. Inclusion is based solely on market share, meaning the companies included are of sufficient size to meet sample size thresholds that create statistically reliable data.

No company is included or excluded based on the company’s request, though companies can hire the ACSI to do an in-depth customer satisfaction analysis.

What’s the sample size collected in your studies?

Based on our advanced Partial Least Squares (PLS) structural equation modeling methodology, the ACSI can achieve statistically reliable results from a range of 100 to 250 respondents per company each quarter. Sample sizes at the industry and company level are not defined arbitrarily; using a historical database of nearly 3 million interviews and a Bayesian statistical procedure, sample sizes are adjusted based on prior information about data variance and stability.

How do I obtain access to specific company scores?

Full confidential data sets for a particular company or industry are only available to ACSI clients. For more information on how to subscribe and what that entails, please contact Tina Dettloff.

I don’t see my company among the list of measured companies; can I get an ACSI score to compare among the industry and my competitors?

The ACSI offers proprietary solutions that allow any organization to obtain data via the same survey methodology the ACSI utilizes across all industries. Companies will be provided with metrics calculated for the corresponding industry with apples-to-apples benchmarking opportunities. That’s the beauty of our national, cross-industry measurement! For more details contact Tina.

 

If you have any other questions, leave a comment below and we’ll be sure to get back to you — and possibly include it in another FAQ post.

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Etsy and Amazon are where it’s ‘app’ on mobile

There’s a first time for everything.

In our most recent Retail and Consumer Shipping Report – where customer satisfaction dipped 0.9 percent to an ACSI score of 77.4 (out of 100) – one of those firsts was the inclusion of Costco, Etsy, Wayfair, and other major internet retailers to the list. But it didn’t stop there.

For the first time since 2010, Amazon lost its grip on the e-commerce space. The new king of internet retail? Costco, with an ACSI score of 83.

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One other first stood out, an element within internet retail that we officially measured for the first time: mobile app satisfaction.

The highs and lows of the mobile experience

If you consider e-commerce a hot market, then the use of mobile in retail is like walking on the sun. Unfortunately, while some companies know how to walk the walk, others, not so much.

The HP Store earned the highest ACSI score for mobile reliability with an 88, however it also came in with the lowest mobile quality score at 72.

Staples struggled in both categories, scoring 76 in mobile reliability and 78 in mobile quality. Sears had the same marks but reversed, with 78 in reliability and 76 in quality.

On the flip side, Amazon, which scored an 87 in both mobile reliability and mobile quality, and Etsy, which also scored an 87 in reliability and recorded a category-best 88 in quality, appear to have cracked the code.

“There’s an app for that” is a cliché for a reason. Every company recognizes the importance of creating a footprint in the mobile market. The real question is, what can companies do to differentiate their application from the competition?

Amazon’s staying power

Consumers don’t just download Amazon’s app; they keep it. Some 76 percent of millennials have Amazon’s mobile app on their phone.

Lincoln Merrihew, senior vice president of client services at Millward Brown Digital, Boston, sees a correlation between the success of Amazon’s app and the success of its overall business model. Merrihew told Retail Dive he sees Amazon as a “combination of a transaction environment and a search engine,” and this works out in its favor.

Amazon offers “one-click ordering and fast shipping options” and has the highest penetration rate among shoppers at 76 percent.

Its app is easy to navigate, easy to use, and offers “special app-only functions.” On top of that, Amazon gives consumers a consistent experience across all of its mobile platforms.

Amazon is truly a “one-stop shop for consumers,” noted Claudia Hoffner, vice president of global marketing for Feedvisor, based on a recent study conducted by the company. It knows what its customers want, where they’re going, and how they’re behaving.

Now that more people are turning to mobile shopping, Amazon continues to make it a priority to adhere to its customers’ needs, thus helping the company maintain customer loyalty.

Etsy listens to its customers

Meanwhile, Etsy pays considerable attention to consistently improving customer experiences. Which is why it redesigned the homepage of its mobile app by including “recommendations.”

“We designed and built the new home screen to give shoppers a better and more inspiring experience on Etsy’s mobile apps,” said Bowen Slate-Green, product manager at Etsy, New York, to Retail Dive. “By providing shoppers with an improved experience, they can better find items and shops that intrigue them.”

By implementing a feature that helps personalize the user experience, Etsy is creating a simpler shopping experience for its customers. Users no longer need to spend time searching for products, Etsy has already done that for them. This streamlines the process, and puts the items shoppers find appealing – based on previous searches and purchases – right in front of them. Consumers are likely already on Etsy because they want to shop. Now there’s less hurdles involved.

Said Slate-Green: “Mobile is a priority for us and the new home screen in the Etsy apps is the latest of our enhanced mobile offerings. Going forward, we will continue to develop and roll out new features that improve the overall experience for our mobile-focused community of shoppers and creative entrepreneurs.”

If Etsy continues catering to its individual customers by making its app more personal and embracing the power of technological advancements, it will likely remain among the leaders in mobile customer satisfaction.

Companies must continue to focus on mobile

This was the first year we looked at customer satisfaction with mobile apps within retail, but it certainly won’t be the last.

As we’ve noted before, consumers are becoming increasingly reliant on their mobile devices. They use their phones to do everything from browse the web and watch their favorite movies and TV shows to shop, shop, and shop some more.

Smart companies are recognizing this growing trend and are taking the steps needed to ensure their customers have the smoothest possible mobile experience.

Amazon and Etsy are off to a hot start. But the race has only just begun.

The energy utilities sector should give the people what they want: More green initiatives

Do you know what the energy utilities sector needs? A spark. Badly.

Energy utilities suffered a sector-wide plunge in customer satisfaction, falling 2.7 percent to an ACSI score of 73.2 (out of 100), per our latest Energy Utilities Report.

Despite record-high U.S. natural gas production and exponential growth in electricity generation from renewable energy sources, all three categories of energy utilities took a significant hit in customer satisfaction. Cooperative dropped 2.6 percent to 75, and investor-owned and municipal both fell 2.7 percent into a tie at 73.

Prices are high, the weather has been extreme, and there’s been a decline in electric power reliability. Yet, as it turns out, if there’s one area that has truly hindered customer experience, it’s green initiatives. Specifically, a lack thereof.

Green programs are failing across the board

Efforts to support green programs are flat or falling in all three categories.

For those efforts, cooperative utilities received an ACSI score of 74 (unchanged), municipal utilities had a score of 70 (down 4 percent), and investor-owned utilities came in with a score of 70 (down 3 percent).

This is not good. In fact, it’s worse than not good – it’s bottom-of-the-barrel bad. The customer experience benchmark for green programs is the worst, or tied for the worst, individual benchmark in each of the three energy utility categories.

What’s the takeaway here? Customers are clamoring for eco-friendly solutions.

Some providers are taking these concerns more seriously than others.

Companies committing to green initiatives  

Consumers Energy, a subsidiary of CMS Energy, is dedicated to a “triple bottom line,” according to CEO Patti Poppe.

As part of its commitment to “people, planet, and prosperity,” the company became the first U.S. borrower to enter into “syndicated sustainability-linked revolving credit facilities.” By meeting certain sustainability goals, CMS can reduce the interest rate on its $1.4 billion loan from Barclays. Consumers Energy has a goal of 40 percent renewable energy by 2040 and recently announced plans to develop its third solar power plant.

Back in April, MidAmerican Energy, which is part of Berkshire Hathaway Energy, was named one of the U.S.’s top “environmental champion” utilities for the fourth straight year, based on a nationwide pre-Earth Day survey. Consumers look at the following five categories as part of the study: “promoting clean energy, enabling consumption management, facilitating environmental causes, encouraging environmentally friendly fleets and buildings, and consistently seeking ways to protect the environment.”

As much as we’d like to believe these providers are taking on these responsibilities out of the goodness of their hearts, it’s important not to overlook the obvious business implications. You see, there is a younger generation on the precipice of becoming the country’s largest living generation. And this group is not going to let the planet fall by the wayside.

Millennials in the market

When it comes to eco-friendly endeavors and green program initiatives, millennials definitely have something to say.

In its “2018 State of the Consumer” report, the Smart Energy Consumer Collaborative (SECC) took a deep look at millennials’ interest in renewable energy. And let’s just say this generation is all about it.

While 41 percent of consumers said they’d be willing to pay an extra $15 a month for access to clean energy, over two-thirds of millennials were open to forking over the extra cash. Over half of millennials are intrigued by the concept of solar panels.

Clearly these consumers believe protecting the planet is worth the cost.

Go green or go home

We’d be remiss to claim that all utilities providers have to do to regain favor with their customers is to fix their “green” problem. However, what is clear is that the consumers have spoken – and they are in support of more green initiatives.

Some companies have heard the call and are taking action. Others would be wise to follow their lead.

Costco tops Amazon as the new king of internet retail

Amazon’s reign is officially over – for at least one year, anyway.

After leading customer satisfaction in the e-commerce space since 2010, Amazon dropped 4 percent to an ACSI score of 82 (out of 100), according to our latest Retail and Consumer Shipping Report. The new leader? Costco.

In its first year in the internet retail category, Costco posted an ACSI score of 83, matching its in-store mark for both the department/discount and supermarket categories.

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Costco wasn’t the only newcomer to score high in its first year in the internet retail category. Among the 21 new companies, Etsy, Kohl’s, Nike, and Nordstrom each debuted with an ACSI score of 81. Apple, HP Store, Macy’s, Target, and Wayfair also made strong impressions, scoring 80 a piece.

The expansion of this category makes Costco’s top-ranking performance all the more impressive. Costco has historically succeeded in categories linked to the in-store experience – especially when you consider the popularity of its pizza – so when you factor in the e-commerce experience, the results seem almost inevitable.

Costco’s recipe for success

Membership-based warehouse stores were the real winners in the retail trade sector in 2018, and none shined quite like Costco. According to CNN Business, Costco’s strategy to accomplish this was to “perfect what’s been working for four decades.”

Brick-and-mortar stores are the company’s bread and butter; that’s unlikely to change. Customers enjoy the experience of shopping at Costco, they remain unwaveringly loyal – 90 percent of Costco members renew their subscriptions – and perhaps most importantly, they appreciate the value they receive.

Costco offers cheaper products without sacrificing the quality. Look no further than its signature Kirkland brand, which offers less expensive alternatives and is considered by analysts to be “one of the most popular white labels across retail.”

How does all of this tie into Costco’s success in online retail? Perhaps it’s best to look at why Costco decided to go online in the first place.

What’s driving Costco online?

Costco had been reluctant to venture into online retail for two reasons. First, its winning formula has always been based around giving customers a great in-person experience, and second, it’s pricey to ship bulk items.

Costco may have been dubbed “Amazon-proof,” but there’s no guarantee the label lasts forever. One way Costco has staved off the competition is by cornering the food market. Per CNN, 93 percent of Costco members turn to the warehouse store for their groceries. But for how long?

Costco can’t afford to get complacent when other online retailers want a piece of the pie. The only way to defend itself against would-be assailants is to embrace internet retail.

And it has. Costco now offers same-day fresh delivery through Instacart and also launched CostcoGrocery.

With CostcoGrocery, members receive two-day delivery when they order “shelf-stable” products on the website. They also get free shipping if the purchase exceeds $75, according to The Wall Street Journal.

How Costco is reshaping the e-commerce and retail landscape

Costco’s biggest selling point is its in-store experience. It’s made a killing in that respect. But it also recognizes the importance of creating a presence in the e-commerce space.

Costco offers 10,000 products on its website and app. It lets you buy expensive items online, including furniture not previously sold in stores, and gives you the option to pick up your online purchases in the store. The result of Costco’s expanded online offerings has been a 21 percent increase in online sales since July 2018.

In a world where most customers are choosing to shop online, Costco has managed to keep its customers coming back to the warehouse. And yet, that hasn’t prevented it from dabbling in the e-commerce space. From the looks of it, Costco is clearly succeeding there as well.

Even if the Oscar Doesn’t Go to ‘Roma,’ Netflix Has Already Won

If you’re a film buff, a fan of A-list celebrities, or simply can’t turn down a full-fledged red carpet extravaganza, odds are you’ll be glued to your television on Sunday for the 91st Academy Awards.

While we can’t guarantee this year’s event will be any more (or less) exciting than years past, we already know it will feature something that’s never been seen before: a Netflix film nominated for Best Picture.

Sure, Netflix has earned a few Oscar nods over the past few years. But it’s never been up for Best Picture. With Alfonso Cuarón’s “Roma” – nominated for 10 awards – the streaming behemoth has a legitimate shot to take home the year’s most prestigious gold statue.

Winning the Academy Award for Best Picture would be big for Netflix – and for streaming services in general. It would represent proof that the “Davids” of the small screen can take down the “Goliaths” of the silver screen.

And yet, as much as coming away victorious in the Best Picture category might help Netflix’s credibility among the Hollywood elite who believe that awards season is all that matters, the truth is, Netflix has already won – and has been doing so for quite some time.

It’s Netflix’s world, and we’re all living in it

On the most recent episode of Recode Decode, IAC and Expedia Group chairman Barry Diller said, “Hollywood is now irrelevant.” While that’s a bold statement, there’s plenty of evidence consumers are flocking to streaming services for their original content. And in terms of customer satisfaction for that content, Netflix rules the roost.

According to our most recent data, as of February 7, 2019, Netflix boasts an ACSI score of 81 (out of 100) specifically for its original content. That’s a 2.5 percent bump in customer satisfaction since the May 2018 telecommunications report. The streaming giant has a two-point advantage on its closest competition, HBO Now, which rose 2.6 percent during that same time to 79, and has no intention of slowing down.

Netflix is reaping the rewards of its heavy investment in original content, according to The Motley Fool, and plans to continue with that strategy, with 85 percent of its new spending going toward original productions, per chief content officer Ted Sarandos.

“Netflix has won this game,” said Diller later in the podcast. “I mean, short of some existential event, it is Netflix’s. No one can get it, I believe, to their level of subscribers, which gives them real dominance.” With 245 original shows on its service and another 257 originals in the pipeline, it’s hard to argue with him.

Amazon and Hulu on the rise as well

Although Diller claimed, “those who chase Netflix are fools,” it’s not as if Netflix is the only streaming service seeing success.

Amazon Prime Video’s customer satisfaction with original content is up over 4 percent since May to an ACSI score of 76. The studio has a strategy for taking on Netflix, which includes putting out 30 movies a year, per Amazon Studios chief Jennifer Salke. Amazon also isn’t afraid to drop big money on the festival circuit, spending $47 million at Sundance this year – more than anyone else.

For its part, Hulu increases its original content satisfaction as well, jumping 1.3 percent to 75. The company has 34 original shows available for streaming and another 53 in the queue. Hulu’s main focus is on the comedy genre — 36 percent of its upcoming shows fall under that category.

Win or lose…

Amazon had a Best Picture nominee back in 2017 with “Manchester by the Sea,” but ultimately lost out to “Moonlight.” Now, we’ll wait to see if Netflix can do what Amazon could not.

You’ll have to tune in on Sunday to see it all happen live. Of course, even if “Roma” can’t beat out the competition, it’s clear Netflix is already a winner. Don’t expect that to change anytime soon.

Online vs brick-and-mortar: How purchase-channel differences impact customer loyalty

Experts predicted high holiday sales — the best in years — and big-box retailers … missed the mark. This happened despite more retailers than ever concentrating on e-commerce to capitalize on predictions that consumers would spend more than ever online.

So, what happened? Part of the problem could be that retailers invested in the wrong aspects of their customers’ online and brick-and-mortar shopping experiences, unintentionally hurting customer satisfaction and the likelihood a customer will repurchase.

Specific aspects of customer satisfaction matter more or less depending on where customers shop, and because better customer satisfaction leads to increased customer loyalty, retail executives who don’t understand these differences can miss opportunities to maximize their sales. Knowing how best to cultivate customer satisfaction in a multichannel marketplace is an important competitive advantage, especially for executives planning new campaigns that span online and offline channels. Strengthening customer loyalty can help companies expand their market share.

Previously, there had been little research verifying these differences, but we recently dove into our data and uncovered a few key differences in how customer satisfaction is generated in online and offline purchase channels.

One chance to get it right with online shoppers

To start, we found that customers are more sensitive to their satisfaction when shopping online. What do we mean by that? The likelihood a customer will never purchase a product again or will switch retailers following a single unsatisfactory brand experience is much higher online than offline.

This comes down to convenience. With virtually unlimited retailers at an online shopper’s fingertips, it doesn’t cost them much to switch to a competing brand. But the same customer might need to drive 15 minutes out of their way to find a brick-and-mortar substitute — something they might not be willing or able to do.

Moreover, while customer satisfaction can drop for any number of reasons, our research found that perceived value (a measure of quality relative to price paid) drives customer satisfaction more online than in person. This too is unsurprising, given that e-commerce has played a large role in driving down prices across the retail world.

Perceived value is impacted not only by the product’s quality, but also by any extra costs associated with the purchase, if a promotion is running on the product, if it was easy to find and purchase the product, how quickly the product will be delivered (if shopping online), and more. Because it’s easier for customers to conduct price and quality comparisons online than offline, customers hone in on and develop perceived value more so online than they do in stores.

To build customer satisfaction through perceived value, online retailers should have more efficient websites than their competitors, offer easier access to purchase and search history, and provide more product details, photos, and videos.

Online retailers can’t ignore other factors influencing customer satisfaction either, such as overall quality and expectations. By improving each part of the customer’s experience, online retailers can combat the hair-trigger tendencies e-commerce customers have to switch retailers.

Overall quality and customer expectations key for brick-and-mortar stores

Meanwhile, our data show that the customer satisfaction of offline customers is driven more strongly driven by overall quality and expectations. In brick-and-mortar stores, quality products and customer expectations are key to customer satisfaction. The advantage traditional retailers have is two-fold: face-to-face human interaction and a perceived reduction in shopping risk.

When interacting with an in-store sales representative, customers can ask every question they have and receive trustworthy answers in response. Customers can also handle the product they intend to purchase, receiving tactile feedback about its quality.

This finding validates current recommended practices to enhance customer experiences: Create a pressure-free environment to interact with high-quality products, and ensure knowledgeable staff is on hand. Additionally, offline retailers need to focus on sharing reliable product information and maintaining a trustworthy image.

However, brick-and-mortar retailers won’t be able to attract digital shoppers and compete with their online competitors just by focusing on these areas. Keeping in mind online shoppers’ emphasis on perceived value, brick-and-mortar stores must devise a way to one-up online competitors in this regard. That could start with more competitive pricing, though executives should be wary not to fall into the trap of price cutting.

Overall, retailers can develop better customer experiences and drive more purchasing by customizing their approaches to online and offline purchase channels. Even though retail executives face mounting pressure to consolidate channels and adopt omnichannel strategies, they can’t lose sight of the differences as they head into 2019. If they do, online and offline executives alike risk hurting customer satisfaction and losing out on market share because of decreased customer loyalty and repurchase intent.

The above findings generally persist across customer demographics and retail categories. For exceptions, details on methodology, and more results from the research, read the full paper in the Journal of Retailing.

Dip in federal government satisfaction is not just a ‘now’ problem

U.S. federal government services experienced a drop in customer satisfaction for the first time in two years, dipping 1.1 percent to an ACSI score of 68.9 (out of 100), per our latest Federal Government Report.

While this downturn is not a result of the government shutdown, make no mistake: The longest shutdown in U.S. history – at 35 days – has left an indelible mark on the American people – and not in a good way.

President Trump signed a bill to reopen the government for three weeks. However, the Feb. 15 deadline is going to be here before you know it, and the fear of another potential shutdown is most certainly on the minds of the 800,000 federal employees who returned to work on Jan. 28. But it won’t just be those federal workers feeling the impact.

The millions of everyday citizens that interact with the nine federal departments and agencies that closed their doors during the shutdown felt the effects too. And while data collection for our 2018 report ended before the shutdown began, we can expect the effects to be reflected in the satisfaction marks come 2019.

That doesn’t necessarily bode well for the federal government.

What did the government shutdown impact?

Thirty-five days doesn’t seem like much in the grand scheme of things. But a lot can happen in that time.

Thanks to The New York Times’ government shutdown timeline, we have a running list of what took place between Dec. 22 and Jan. 25. Without getting into everything, it’s clear the effects of the shutdown are far-reaching, extending well beyond those experienced by federal government employees.

For example, the Department of Interior scored a 78 in our latest report. This ties for the highest among federal departments. However, national parks fall under Interior, and the shutdown has not been kind to these landmarks.

We’ve seen injuries at places like Big Bend National Park, where a man fell and broke his leg. He was carried to safety by fellow park visitors and a park ranger, but the park had limited rescue services because of the shutdown. Other services, like road maintenance and trash pickup, were suspended by the National Park Service back on Dec. 30, creating unsafe, unsanitary, and unpleasant conditions.

During the shutdown, the Smithsonian museums and the National Zoo were closed. As was the National Gallery of Art. And then, of course, there are the airports.

Many Transportation Security Administration (TSA) workers and controllers began calling in sick instead of working without pay. At best, the disruption caused inconveniences like longer lines at security checkpoints; worst, it caused chaos and safety violations. Miami International Airport closed a terminal on Jan. 12 because it didn’t have enough security screeners. On Jan. 25, New York’s La Guardia Airport ceased allowing inbound flights due to delays, causing air travel congestion along the Eastern Seaboard. And on Jan. 2, a passenger flew from Atlanta to Tokyo with a handgun.

These are merely some of the incidents that took place during the shutdown. And just because the government is back open – at least for the next three weeks – most people aren’t simply going to forgive and forget all the turbulence, especially with the lingering ramifications.

Future costs of the shutdown

The shutdown is over for now. The consequences of that shutdown, however, will be long-lasting.

The National Taxpayer Advocate, a government watchdog group, told House staffers that the Internal Revenue Service (IRS) will likely need 12 to 18 months to recover from the shutdown.

The IRS has millions of unanswered taxpayer questions to deal with. It needs to hire thousands of employees for this tax filing season, and it needs to make up lost time when it comes to training workers. But the IRS is just one department that’s feeling the pressure.

The Bureau of Indian Affairs needs to issue grants to prevent food shortages and a health care crisis, and the National Park Service has an amenities problem on its hand. This is likely only the beginning.

The federal government shutdown cost the economy $11 billion, according to the Congressional Budget Office. Most of that loss will be recouped once the shutdown ends and folks return to work, but the CBO estimates that $3 billion is “permanently lost.”

Although our 2018 report was not influenced by the shutdown itself, satisfaction in the federal government was already heading south. Even with the government back up and running (for now, anyway), it’s almost impossible to look at all that’s happened without expecting a lingering ripple effect throughout the rest of 2019.

Think you know your customer? Maybe not.

Every manager knows that happy customers mean better business. But despite decades of in-depth research, elaborate customer satisfaction monitoring systems, and extensive customer service support teams, managers still struggle to understand their customers’ desires and needs, leading them to make misguided decisions that can hurt their business.

From misinterpreting data to undervaluing what drives purchasing decisions, our research shows managers get more wrong about customers than they get right.

Managers think they know their customers

Managers might want to think twice about how well they understand their customer. Even some highly confident managers don’t understand all the levels and drivers of customer satisfaction.

In the aggregate and on average, the managers we surveyed significantly underestimated their customer’s propensity to complain, and thereby failed to address the customer’s complaints. Additionally, they overestimate their customers’ satisfaction and loyalty while misunderstanding what drives both customer expectations and perceptions of value.

With the importance most companies place on customer feedback, how can these misunderstandings be so widespread? Managers should look to the type of feedback they’re measuring, to start. Not all feedback is useful (no matter how pretty those 5 stars on Yelp appear).

For example, what does having a high average review score tell you about your customer? Many managers make the mistake of blissfully accepting a positive review, but either don’t take the time or don’t have the data to understand why the customer gave them a particular rating. When implementing customer feedback monitoring systems, managers should emphasize specifically catered feedback that will provide relevant insights into their product and service decisions.

The data has the answers, but you still don’t

Implementing a customer satisfaction monitoring system – such as market research or consumer data collection and analysis — to evaluate customer feedback and communicate the data throughout the organization is a solid first step in understanding customer satisfaction and motivations. However, for many organizations, these systems often don’t live up to their potential. There are two reasons for this:

  1. Some managers aren’t exposed to the data these systems collect.
  2. Some managers receive the data, but they misinterpret and misunderstand it.

Both cases result in frustrated customers, falsely confident managers, and ultimately, the loss of business. Monitoring systems only work if managers have access and training to accurately interpret the data.

Additionally, to extract all the benefits from monitoring systems, managers should inspect the current extent and nature of their customer perception level to help minimize any manager-customer disconnects. This baseline will uncover the holes in understanding and facilitate more informed decisions to close them.

Once managers understand where lapses in data and interpretation are occurring, they can take corrective actions that make sense for their business, and ultimately, for their customers.

Going beyond what the customer wants

Understanding what your customer wants is the first step, but to truly bridge the gap in manager-customer misunderstanding, managers need to take it a step further. Beyond what your customer wants, why do they want what they do?

In many oversaturated and competitive markets, like retail, simply knowing what your customer wants isn’t enough anymore. There are five, 10, even 100 other firms selling the same exact product or service for a better price. And yet, the more expensive option might sell better and produce more satisfied customers.

Why? Lower prices are not the deciding factor in winning over the customer. Instead, quality drives customer satisfaction and loyalty, along with perceived value and customer expectations. So before scrambling to stay competitive in the short-term by reducing prices, managers need to take the time to find out why the customer feedback says what it says.

Learn from Netflix’s mistake. In 2011, Netflix CEO Reed Hastings pushed for a premature split between hard copy DVDs and the company’s new streaming service — a move that resulted in 800,000 fewer subscribers and more than a 25 percent stock plummet. The split not only divided customers, but required them to pay for both services separately. Turns out, the new business model combined with the price increase was enough to warrant a “no” from the “Are you still watching?” prompt.

Hastings apologized a few weeks later, admitting he was overconfident in the push to streaming and assumed that the divide had already been presented to customers via feedback platforms (clearly, it had not), and that the price increase wouldn’t come with backlash (wrong again).

Following this misinterpretation, Hastings made a swift recovery by focusing on why the remaining customers were interested in streaming services over DVDs, leading to an amazing comeback in 2012 that’s held up through today.

Making the change

Winning over customers is about more than implementing fancy monitoring systems and simply relying on the data without context; it’s also about understanding the customer’s desires and needs, and — as a manager — checking your ego at the door.

With the plethora of data available today, it’s easy to misinterpret information and direct precious resources to well-intentioned but needless tasks. To avoid making this mistake, it’s time for managers to reassess data, determine key drivers of customer satisfaction as well as complaints, and fix gaps in interpretation and information sharing. If managers make the effort now, they’ll have happier customers — and better bottom lines — in the long run.

Mobile apps help drive satisfaction with insurance and investment services

Every year we take stock of customer satisfaction in the financial and insurance sector. In recent years, we’ve noted digitalization is driving the success of retail banks, and technological advancements are improving satisfaction across the sector. Our latest report supports those points.

In particular, mobile apps – which we measured for the first time this year — are improving customer satisfaction even as other online resources, like websites, dip within the sector.

ACSI-mobile-finance-insurance-infographic

Based on our 2018 finance and insurance report, here are a few ways mobile apps are already contributing to the finance and insurance sector’s success.

Nationwide most improved among insurers, thanks to cutting-edge mobile app

In early 2018, Nationwide became the first company to enhance its mobile capabilities with a new blockchain framework. Designed specifically for the risk management and insurance industry, the framework enables Nationwide to offer customers real-time policy verification and eliminates the need for hard-copy documentation—streamlining a historically cumbersome process.

The app, which also allows consumers to start and process claims from their mobile devices, scored exceptionally high marks in customer satisfaction in 2018 and propelled Nationwide’s 5 percent gain in overall satisfaction, which is the largest improvement by any property and casualty insurer this year.

Industry-wide, the quality and reliability of mobile apps, which can be used to pull up policies, document accidents, and easily reference claims, rank near the top of all benchmarks measured. Customers give mobile app quality an ACSI score of 87 and the reliability of mobile apps, defined by minimal downtime, crashes, and lags, an 85.

Life insurance leads in mobile app satisfaction

Life insurers are getting creative with mobile options, too. For instance, John Hancock has developed a program, available via its app, that encourages policyholders to be more proactive with their health. For every 10 workouts they record, policyholders earn the chance to spin a wheel of fortune in their mobile app and accrue points they can redeem for gift cards. These incentives are improving customer engagement, experience, and satisfaction.

Across all insurance industries ACSI measures, life insurance scores highest for both quality (90) and reliability (89) of mobile apps. Driven in part by these scores, satisfaction for the industry rises 2.6 percent to an ACSI score of 80.

The flip side: Technical glitches hurt satisfaction

While some companies are satisfying customers with mobile options, other companies can’t seem to master the basics. Vanguard, the previous customer satisfaction leader in the investment services industry, is one example. The company drops 4 percent to a score of 79 following system issues like phone and website connection problems that left customers fuming, as well as automated texts that incorrectly stated loans were being processed.

Vanguard’s technological hiccups weren’t enough to bring down the industry as a whole however. Reliability and quality of mobile apps (both 82) top the charts and life insurers continue to hold steady at a score of 79.

Digital technologies make strides

Mobile is high on customers’ priority lists, and with a few exceptions, insurance and investment companies are delivering. As our data shows, those companies investing in their customers’ digital experience and expectations are reaping the rewards in terms of customer satisfaction.

It’s a digital world, and whether policyholders are looking to file insurance claims or make changes to their investments, companies would do well to meet the demands of the on-the-go customer.