The European Customer Satisfaction Index

For the first time harmonized and tightly coordinated national customer satisfaction studies have been carried out in Europe. 11 countries work together to develop and test a system for regular customer satisfaction monitoring and analysis.

Comparative results are now presented for three different industries, namely: Banking, Telecommunication (both fixed lines and mobile phones) and Supermarket. In addition to these common sectors, each country has chosen a number of sectors/areas based on national priorities for their studies.

The model allows to compare the satisfaction of customers between companies of the same industry in one country as well as to do comparisons between industries and countries

 Customer Satisfaction studies for competitive analysis

 The European Customer Satisfaction Index (ECSI) is being developed to:

¨      Provide companies, public services, consumers, investors, regulators and policy makers with an annual index of customer satisfaction, its causes and effects on loyalty.

¨      Provide the companies and public services surveyed  with the means to analyse the perceptions of their customers (causes and  effects) to compare them with the perceptions of customers of other companies and public services at different levels (sector, country, Europe)

¨      Introduce ECSI as a recognised economic macro indicator measuring the performance of the National and European economies.

 ECSI delivers macro economic indicators and statistical re­sults concerning customer perceived satisfaction and quality measurements for commodities and services in a number of central industries. There are many beneficiaries of the ECSI initiative. Already this pilot survey generates potentially valuable information on many levels of society from the individual consumer and company to the government. It gives on the one hand a voice to the European customers, and on the other analysis instruments for companies, industries and the government (constituting, inter alias, a platform for benchmarking work). The combined wealth of the ECSI information from a number of European countries should also be important for various actors on the European level including EU and quality organizations. Taken to­gether this will promote, directly and indirectly, the relative competitiveness of European industry.

  Coordinated studies in 11 European countries

 More than 50,000 interviews were done during the period March – May 1999, in the 11 participating countries to assess the level of satisfaction of current customers and the reasons for their perception. The data collection was done using a harmonized set of questionnaires and a common survey design structure. A minimum number of 250 observations have been conducted for each pre-identified company. Detailed data has been collected based on telephone interviews to statistical samples of current customers to the respective company.

The level of satisfaction is measured and analyzed by an interdependent structural model including relationships to the Quality of the product, Quality of the service, perceived Value, company Image, customer Expectation and Loyalty .

 The approach

 The ECSI is a new economic indicator system that measures customer satisfaction. It is based on customer evaluations of the quality of goods and services that are purchased in Europe and produced by both European Community and Non  Community companies that have a substantial European market share. In this first phase the specially developed methodology for data collection and analysis is being tested on a limited scale. The intention is that ECSI step by step shall be able to provide a more comprehensive coverage in terms of economic sectors also including the calculation of a national index.

            A common measurement scale is being used in the survey. The estimated results on customer satisfaction, as well as on the other goal indicators, are presented on the scale 0 – 100 (where 0 means that all current customers are totally unsatisfied and 100 that all customers are totally satisfied; that is can not imagine a better provider).

A technical harmonization process has been implemented in order to achieve both national indices and a European index. The data collection, data processing and analysis are based on the results of a research work carried out by a pan-European team in 1998. Initial quality monitoring has been carried out for all countries and industries included in this first presentation. The minimum quality criteria specified by the technical team have overall been fulfilled.

All basic methodology documents are open and available to the research and business communities. 

 RESULTS

 The average level of satisfaction differs between the surveyed countries. In the 10 countries having done comparative surveys on at least three of the four common areas Belgium, Finland, Greece and Switzerland are on top. Here, the national average lay between 72 and 74 (on the scale 0 – 100). The countries with overall lower levels of satisfaction group is composed of Denmark, Italy and Sweden (with levels ranking from 64 – 67. In the middle France, Portugal and Spain fall. This situation is illustrated in figure 1.

 In terms of industry rating, banking and supermarkets are on top (with 70 as the overall pan-European average). Fixed telephone providers offer the overall lowest level of customer satisfaction (index 65.4), while mobile phones fall in between (with the index 68.5).

            Possible reasons for the differences are to be analyzed and evaluated by the research team associated to ECSI. An initial assumption would be that the country variations are composed of a cultural aspect as well as one related to the actual provision of goods and services. For the industry differences it is striking to notice the variation in market structure between for example banking and supermarkets on one hand and fixed telephone providers on the other (with a country average of 6.5 identified and measured banks per country as opposed to 1,9 telephone providers).

One added value of the ECSI approach is that it is possible to not only obtain information concerning the levels of satisfaction, but even more so to get further understanding of the reasons for the customer valuation, and to trace effects in terms of future loyalty. In this context, the relationship between satisfaction and loyalty is crucial for future analysis of company strength, as well as between perceived quality and value on the one hand and satisfaction on the other. These cause-effect relationships vary in strength and offer good opportunities for exploring possibilities to improve the future competitive situation of an individual company.

 Retail banking

 Retail banking has been included by all 11 pilot countries. From the available results it is found that the European customers give their retail bank an overall customer satisfaction index of 70.1 (on the scale 0 – 100). This is based on weighting of the index from each country with the respective relative GDP. The number of banks surveyed differs from one nation to the other. The national index has been arrived at by weighting each company result with the respective market share. The country aver ages are given in Figure 2.                                                       
Also the variability in terms of customer satisfaction within the banking industry differs between countries. On the high side we find Denmark, Greece and Switzerland (where the difference between the top performer and the one lagging most behind is between 11 and 18 index points). At the lower end are found Italy, Belgium, Iceland and Spain (with a distance of 3 to 7 index points).

 Fixed telephone providers

 8 countries have carried out ECSI-harmonized studies on fixed line telephones. The pan-European average for this area is 65.4

 In most surveyed countries we find merely one or two providers.

 Mobile phones

 In total 10 of the participating countries carried out special studies on mobile phones. The pan-European average is here 68.5.

  The competition is more predominant in the mobile area then for fixed phones. Here we also see a few examples of substantial company to company variation. On top are Spain and Denmark (with a distance of 7 to 10 index points between the top performer and the one lagging most behind). At the same time France offers an example with low spread between the top and the one on the other end. 

  Supermarkets

 Supermarkets have been covered by five of the pilot ECSI countries. The overall average is 70.0.lso here we see different patterns between the countries with Finland and France showing rather close competition in terms of satisfaction level. Switzerland and Denmark on the other hand have a much wider spread between the top performer and the companies lagging behind.

 Quality of data and results

 The explanatory power of the used model is assessed for each individual company. This gives an indication of the quality in the modeling. Overall, the requirements set up by the technical study team prior to the start of the project have been achieved.

An illustration of the proportion of all variation between current customers that is explained is illustrated in the graph below (for mobile phones).

 The pan-European average for the explanatory power is 68 percent for mobile phones. This can be compared with the level 69 for fixed telephones, 71 for retail banks and 61 for supermarkets. These results taken together imply that the overall model explanation is less appropriate in the case of supermarkets than for the other areas compared.

            On average the models show the best fit for Greece and Italy, while in the case of Portugal and Switzerland the level of unexplained variation is higher.

In terms of statistical precision for the satisfaction level, the target was set at 2 2 index points. This means that any differences between two countries and/or two companies beyond plus/minus 2 unit points shall be statistically significant on the 95 percent level. The goal has been achieved in about half of the cases. The situation is illustrated in the following graph. Here the confidence interval has been put on top of the lower level of the estimated satisfaction index for each country (referring to fixed telephone providers, which shows the least favorable pattern in terms of statistical precision).

  The results may in this respect be interpreted in the way that the satisfaction level for any two countries that does not cover one another are significantly different.

 Relationship between satisfaction and loyalty

 Customer satisfaction may not be a goal in itself, but merely a means for improving the performance. In the prevailing model performance is measured as loyalty (the degree to which it should be expected that the customer returns to the current company next time he is due to acquire the same goods or service). The higher this index is the better retention rate should be expected for the company.

            The overall (country average) level of customer satisfaction and loyalty are illustrated in the graph below (for retail banking).

 The relationship between loyalty and satisfaction differs also from area to area. Overall (for the pan-European average) the loyalty index is 1.4 points higher than satisfaction for retail banking, 3.0 points lower for fixed telephones, 0.1 point higher for mobile phones and 1.5 points higher for supermarkets.

Similar studies are possible to do also for those variables expected to explain the level of satisfaction (image, customer expectations, product quality, service quality and perceived value for money). On the next level of analysis it is possible to trace the strength between the different variables in the model, giving indications of what can be achieved by introducing policy changes (on company, industry or national level).

   Further results and analysis

 The variations within countries between industries and from company to company are analyzed by each national ECSI team. These studies are successively being published. Pan European studies will also be published for the common industries studied.

            In addition further research based on the available database will be conducted. The results of this will be used for future development of the ECSI system. It will also be presented step by step by the ECSI/EPSI group.