E-Business, PCs Really Satisfy: Report

U.S. consumers are feeling very pleased these days with the service they
are getting from their PCs and e-business portals, according to a new report
published Tuesday.

The latest American Customer Satisfaction Index (ACSI) — a national
economic indicator produced by the University of Michigan — hit 74.4 for
the second quarter of 2004. On a scale of 100, the overall index remained
unchanged from last quarter and is holding steady at its highest level in
ten years.

The overall ACSI score for a given quarter factors in scores from about
200 companies in 40 industries and from government agencies over the
previous four quarters.

Higher satisfaction scores have implications for companies beyond simply
making customers happier. “A company that improves in customer satisfaction
tends to perform better financially by generating more repeat business,
which leads to greater profits and higher stock price,” Professor Claes
Fornell, who heads the Index at the University of Michigan, said in a
statement.

While the overall study also covers a wide range of topics including
automobiles and appliances, the report found some top American PC brands are
improving their service image. Apple Computer leads the
pack with a score of 81, making a 5 percent improvement in each of the last
two years. Gateway has also improved to a score of 74
especially after its acquisition of eMachines.

Going in the opposite direction is Hewlett-Packard . Once
a customer satisfaction leader, the Compaq acquisition has dragged the Palo
Alto, Calif.-based computer and printer maker down, according to the ACSI
report.

“HP remains competitive on price,” Jack West, past president of the
American Society for Quality, and a co-sponsor of the ACSI said in a
statement. “But this is a reminder that there’s more to satisfaction and
loyalty than meets the eye. HP’s problem is that the quality of both their
products and service support has fallen off sharply since the mid-1990s,
when HP was leading the industry.”

Search is King

Researchers also found Americans’ approval with search engines, portals
and online news and information sites also edging upward. Search remains the
clear standard-setter among the three e-business sub-categories measuring a
combined score of 80 on the 100-point ACSI scale, with portals (71) and
news/information sites (75) lagging well behind.

Google with a score of 82 is by far the over achiever
on the block despite the potential strain of brand extensions and other
changes. Ask Jeeves is a very distant second in the pure
play search category but has managed to jump up to a score of 71 since being
below the average three years ago.

Google’s real competition may be coming from the portal category: Yahoo
, which earned a 78, and MSN with a
75 have significantly higher satisfaction scores than the closest search
engine competitors, and both are focusing on improving search within their
Web sites.

Larry Freed, president and CEO of analyst firm ForeSee Results said the
lines between search engines and portals are blurring with each sub-category
competing by increasingly taking on characteristics of the other.

“Google is a star performer in the search field, but other search engines
are not its only competition,” Freed said in a statement. “Google and other
search engines likely face future competition for retail-driven search from
companies like Amazon, an absolute customer satisfaction machine. It’s not
always easy to keep people with you while you extend your brand. That
Google has been able to do so is a testament to the brand’s value though
they have bigger hurdles ahead.”

Of the other portal and content sites, the ACSI report found AOL is
experiencing a Renaissance. The Time/Warner subsidiary’s
latest score of 67 is still well behind rivals but a remarkable improvement
over their score of 56 five years ago. Faced with a diminishing number of
dial-up subscribers, Freed said AOL has been forced to seek revenue by
marketing higher quality content and services to non-subscribers.

“AOL is back from the dead, and that is the striking thing among
portals,” said Freed. “It seems AOL’s content-heavy approach and
partnerships have real appeal.”

And while high levels of satisfaction with shopping and consumption
usually mean that people become more willing to spend, which also gives a
boost to the economy, University of Michigan’s Fornell found considerable
forces pulling in the other direction.

“Price adjusted satisfaction is actually dropping,” he said. “Add weak
employment, debatable wage growth and higher interest rates to the picture,
and enthusiasm for buying more weakens. Nevertheless, third quarter
spending is almost certain to be higher than the dismal second quarter
spending.”

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