American Customer Satisfaction Index (ACSI)

DEFINITION of 'American Customer Satisfaction Index (ACSI)'

The American Customer Satisfaction Index (ACSI) provides information on how satisfied U.S. consumers are with the products and services available to them. The American Customer Satisfaction Index produces four levels of indexes or scores — a national customer satisfaction score, 10 economic sector scores, 44 industry scores, and scores for more than 300 companies and federal government agencies. The ACSI is an important indicator of economic performance for individual firms as well as the macro economy.

BREAKING DOWN 'American Customer Satisfaction Index (ACSI)'

The ASCI index uses information gleaned from about 180,000 customer interviews as inputs to a multi-equation econometric model developed at the University of Michigan. The index was first published in October 1994 and is updated quarterly on a rolling basis, with new data for one or more economic sectors replacing data collected the previous year. ASCI data is used by businesses in planning and capital budgeting, researchers analyzing consumer behavioral trends, and policymakers who utilize it to have a better idea of the health and direction of the economy.

A company's ASCI score is derived from survey questions within a questionnaire. Each question entails a 1-10 rating scale to rate a company, government agency or other entity. Organizations are rated on the following: overall satisfaction (1 meaning 'very dissatisfied' and 10 meaning 'very satisfied'); expectancy disconfirmation (1 meaning 'falls short of expectations' and 10 meaning 'exceeds expectations'); and comparison to an ideal (1 meaning 'not very close to the ideal' and 10 meaning 'very close to the ideal'). For more, see the ASCI's website.

American Customer Satisfaction Index (ACSI): Key Findings

With two decades of experience collecting consumer satisfaction information, the ASCI has made a list of key findings based on its research:

  • High customer satisfaction correlates to better company financial performance.
  • Changes in customer satisfaction affect the willingness of households to make purchases (price-adjusted ACSI is a leading indicator of consumer spending growth).
  • With consumer spending accounting for 70% of gross domestic product (GDP), changes in customer satisfaction correlate to GDP growth.
  • ASCI scores for manufactured goods (food items, appliances) are generally higher than those for services (airlines, banks, cable television).
  • Quality is more important than price in satisfying customers in nearly every industry measured by ASCI. Price promotions may work over the short term in raising satisfaction but price cuts are not sustainable in the long term. Companies that focus on improving quality tend to do better in the long run.
  • Merger and acquisition activity generally has a negative effect on customer satisfaction, especially with services.

American Customer Satisfaction Index (ACSI) and Investing

The reports that are produced from ASCI survey data may have the power to move markets. Stocks of companies with high ACSI scores tend to do better than those of companies with low scores, while the national ACSI score has been shown to predict trends in both consumer spending and stock market growth. ASCI also provides its proprietary customer service satisfaction data to exchange-traded fund (ETF) developers. A portfolio of stocks selected based on customer satisfaction levels outperfomed the market according to a 2006 paper in the Journal of Marketing.