Corporate America increasingly falls short in service

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By ROBERT TRIGAUX

© St. Petersburg Times, published May 27, 2001

Be glad. No, be very glad you are not a customer these days of Pacific Gas & Electric.

The California utility posted the biggest year-to-year decline in customer satisfaction ever recorded by a major corporation in a highly regarded survey conducted quarterly by the National Quality Research Center at the University of Michigan Business School.

On a satisfaction scale of zero to 100, San Francisco's PG&E saw its score fall an astonishing 33 percent, from 73 to 49, in the first quarter 2001 survey best known as the American Customer Satisfaction Index.

How bad was the drop? PG&E's score of 49 is lower than that of the Internal Revenue Service when the IRS was last scored in the fall survey of 2000.

There are good reasons behind PG&E's fall from grace. Charging high electric rates, financially strapped and widely blamed for its role in California's rolling blackouts, the utility filed for bankruptcy protection last month.

Before we Floridians give silent thanks for living cross-country from PG&E's service territory, there's some bad news for us, too, in the quarterly satisfaction survey released last week.

Customer satisfaction with U.S. corporations in general declined in the first quarter of 2001. It was the second quarterly drop in satisfaction in a row, a likely result of cost-cutting and layoffs prompted by the sagging economy.

The sad conclusion? The public's perception is that customer service in America stinks and getting worse.

On a 100-point scale, corporate America is pleasing only 72.2 percent of its customers. That's down from 72.6 the preceding quarter and much lower than the 74.4 scored when the index started in '94.

The current score is not the lowest the seven-year index has reached (70.1 was hit in the first quarter of 1997). But the slide to 72.2 is the sharpest quarterly drop in two years.

Few parents would be proud if their kid came home from school with the equivalent of a C report card that still seems headed south.

The first-quarter index "presents a fairly bleak picture of the trend in customer service in the U.S.," says University of Michigan Business School professor Claes Fornell, who coordinates the survey.

Fornell considers customer satisfaction a leading economic indicator. In other words, the recent declines suggest the economy is not likely to improve soon.

Poor consumer service is more than an annoyance, he says. It is a "threat" to corporate earnings.

Not all is bleak. A few companies bucked the negative trend in the first-quarter survey. Continental Airlines improved its score, and Sprint and Verizon (local service) showed modest gains (though Verizon's long-distance score declined).

But the brighter moments are outweighed by day-to-day examples of companies with consumer complaints, problems with service and executive denials: Firestone's shredding tires. Allegations of Mitsubishi harassment and Lockheed Martin discrimination. Telephone company slamming. Coca-Cola's manufacturing mistakes in Europe. Massive tobacco industry lawsuits. Basic billing headaches. They all add up.

Consider Friday's lead, front-page headline of the Wall Street Journal: "Ford Has Big Problem Beyond Tire Mess: Making Quality Cars."

In the first quarter survey, consumers gave lower scores to most individual companies and all of their industries. Utilities fell 8 percent. Hotels were down 5.3 percent. Telecommunications sank 6.7 percent. Airlines dropped 15.3 percent. Express mail was down 3.7 percent. And hospitals slipped 8.1 percent. (Different industries are surveyed in different quarters of the year.)

Many companies prominent in the Tampa Bay and Florida markets were among those whose quarterly scores slipped.

Let's go straight to the one industry customers most love to hate.

Airlines saw the biggest industry drop in customer satisfaction. Delta Airlines declined the most (20.8 percent), from 77 to 61, of any airline since the satisfaction index started in 1994. Northwest Airlines fell the most (9.7 percent), from 62 to an industry low of 56, from the fourth quarter of 2000 to the first quarter of this year.

Even Southwest Airlines, a perennial industry leader, saw its satisfaction level remain unchanged at 70 from fourth quarter 2000 to the first quarter of this year. And that number is down 10.3 percent from Southwest's score of 78 in 1994.

"There is no year for which customer satisfaction has improved in this industry," Fornell says.

In other industries, less-satisfied customers zinged plenty of companies.

McDonald's? Down 3.3 percent in its last quarterly survey, and down 6.3 percent since 1994.

With a score of 59, the once high-flying fast-food giant has landed (with Northwest and United airlines) among some of the worst corporate ratings since the survey began.

Grocery leader Publix Super Markets? Down 6.1 percent (from 82 to a still healthy 77) since 1994.

Notably, the turnaround effort at Winn-Dixie shows some signs of success. The grocery chain was up 4.2 percent (at 74) in the fourth quarter of 2000 from a year earlier, even though it is down 2.6 percent since 1994.

Customers also say they are less satisfied now with retailers than they were when the index started seven years ago.

In fact, retailers are in a dead heat with the U.S Postal Service in satisfying customers, the survey says.

Among those retail chains hardest hit: service-is-our-name Nordstrom (opening its first Tampa area store this fall in International Plaza), is off 9.5 percent at a still highly respectable 76. And Kmart also is down 9.5 percent but to an industry low 67.

One retailer prominent in Tampa Bay area shopping malls defied industry blues and recently rebounded despite its falling sales and profits. Dillard's score jumped 5.9 percent, from 68 in fourth-quarter 1999 to 72 at the end of last year.

Among the most dissatisfied are consumers of the two dominant banks in Florida: Bank of America and First Union. The survey shows satisfaction in Bank of America declined 12.5 percent, from 72 in 1994 to 63 at the end of last year. And First Union dropped 13.2 percent, from 76 to 66, in the same period.

No question, the tougher economy is not helping consumer attitudes. But don't forget that the overall decline of customer satisfaction started before the current slowdown.

Downsizing, productivity-fixated U.S. companies with the worst satisfaction scores need to do some soul searching. If customers grow increasingly dissatisfied, will they take their business elsewhere?

- Robert Trigaux can be reached at trigaux@sptimes.com or (727) 893-8405.

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