Manufacturing Customer Satisfaction Improves

Kellogg, Pepsi, Reebok, Sara Lee climb; Heinz and Nike drop.

The Manufacturing/Non-durable Goods customer satisfaction rating improved 0.6% from the third quarter of 2005 to 82.3 on the American Customer Satisfaction Index (ACSI). New data released Nov. 14 showed however that overall customer satisfaction is flat.

The index's measurement has consistently predicted future consumer spending, according to its creators the University of Michigan's Ross School of Business. Third quarter results portend little change in spending growth.

"Higher levels of buyer satisfaction suggest higher spending, but consumers' inclination to spend is always tempered by the availability of cash and credit," said Professor Claes Fornell, head of ACSI at the University of Michigan. "Even though the housing bubble is deflating, oil prices are going down and the stock market has been performing well. I don't expect spending to look too much different for the remainder of the year."

ACSI measures consumer non-durables every third quarter, and as a sector it consistently achieves high customer satisfaction. Consumer non-durables require very little service either before or after purchase. There are usually multiple alternatives to any given product, switching costs are low, and prices have remained pretty stable. The ACSI aggregate score remains near its all-time high at 74.4 for a second consecutive quarter

The third quarter report shows improvements in food processing (+1.2%, 83), pet food (+1.2%, 83), soft drinks (+1.2%, 84) and personal care & cleaning products (1.2%, 84), which offset declines in cigarettes (-1.3%, 78) and apparel (-1.2%, 80).

Heinz still tops the food manufacturing industry, but its score drops 4.4 % to 87. The industry -- which covers a range of products including meats, cheeses, fruits, vegetables, tried and canned foods, and candy -- has become a tight race at the top. Kellogg and Sara Lee both jump 5% to 85, but "each company took a different road to improvement. Sara Lee shed less successful product lines and is focusing more on its core business. Kellogg, on the other hand, added a new line of healthier alternatives accompanied by a health-awareness marketing campaign," states the report.

Pepsi jumps 5% to 86, sharing the top spot with Cadbury Schweppes (+4%), maker of 7Up, Dr. Pepper, A&W Root Beer and dozens of other well-known brands. The number one soft drink maker, Coca-Cola, drops 2% to a five-year low of 82.

Reebok climbs 4% to 78, while Nike slipped to 72.

"With a slowdown in the economy, it is usually assumed that consumer spending slows as well. Since consumer spending constitutes about 2/3 of the economy, it is difficult to come to another conclusion. Yet, there are some signs that spending may not weaken. Interest rates are no longer going up. Oil prices are going down. The stock market has been doing well. Customer satisfaction is high. On the negative side, home prices have been falling. Overall, however, it does not look like spending will be much different during the remainder of the year. The ACSI forecasts fourth quarter growth between 2.6% and 3.2%," said Professor Claes Fornell, director of the National Quality Research Center, Stephan M. Ross School of Business.


The American Customer Satisfaction Index is a national economic indicator of customer evaluations of the quality of products and services available to household consumers in the United States. The overall ACSI score for a given quarter factors in scores from about 200 companies in 43 industries and from government agencies over the previous four quarters.

For a complete list of scores from the third quarter please visit www.theacsi.org.

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