NCSI-UK report: Customer satisfaction key to survival for retailers

Five categories were measured in the fourth quarter of 2008 (see table below for results) – supermarkets, department stores, petrol stations, ecommerce and electrical retailers. Of the five retail categories, ecommerce easily outpaced an otherwise tightly-packed field, suggesting that further investment in the online channel could provide retailers with opportunities to drive sales and customer loyalty through a more satisfying shopping experience.

The average NCSI-UK score for online retail was 82, well above the retail sector average of 74.8. This is nearly identical to the US experience, where online retail also scores 82 to outpace the retail sector average of 75.2. Both the quality and value of the online shopping experience are rated superior and consumers who have purchased merchandise online are highly loyal to this emerging retail channel.

It is no coincidence that much of the recent effort to improve customer satisfaction by traditional retailers such as Tesco, Argos, Currys and John Lewis has involved launches, relaunches and other investments to upgrade their websites. The link is clear: companies that drive an increasing volume of business online are doing a better job overall of satisfying their customers, while those that fail to capitalise on the emergence of ecommerce are being left behind.

Among the measured companies, play.com leads with a score of 87 - the highest customer satisfaction score to date in the NCSI-UK - followed closely by Amazon UK at 85. Only Ticketmaster fared somewhat poorly in the category, scoring 74. This is largely the result of high prices leading to very low perceived value for money. With service charges, processing charges and delivery fees, the total price can reach 35% or more of the cost of the ticket itself.

Every little helps

The supermarket category, meanwhile, was first measured in NCSI-UK in the first quarter of 2008, where it debuted with a score of 72. For the fourth quarter of 2008, satisfaction with supermarkets rises slightly to 74, an impressive achievement given the continued high cost of food.

Traditional discounters Asda and Morrisons lead the way, with Morrisons catching up to Asda at 76. Supermarket giants Tesco and Asda engaged in a head-to-head pricing war for much of the second half of 2008, apparently to Tesco's slight advantage. While the UK’s largest supermarket chain still lags behind its largest competitor by a significant margin, despite rebranding itself as "Britain's Biggest Discounter", Tesco's gain of 3% to 73 closed the gap somewhat with Asda, which remained at 76.

John Lewis-owned Waitrose retained its market-leading CSI score of 82, unchanged from the first quarter 2008 and well above nearest competitor Asda. Waitrose has succeeded by offering high quality merchandise and good customer service at a premium price, but even the perennial industry leader had to engage in some discounting as the economy slowed in 2008, investing some £30 million mid-year in various pricing promotions.

The department store category debuted with a score of 76, slightly above the retail sector average. While for supermarkets, below-average perceived merchandise quality and lackluster customer service are partly salvaged by superior value, the opposite is true for department stores. The quality of products and service rate well above the mean for retailers, while value is perceived to be merely average. This fits the image of department stores as places where shoppers are accustomed to paying somewhat higher prices in return for a better shopping experience.

This is not to say that value is lacking - although around one-third of department store customers do feel that products are overpriced. With higher satisfaction comes a lower level of complaints: only 4% of all department store customers have complained about their experiences in the past year, equalling petrol stations for the fewest number of complaints in retail.