Satisfy customers, make money

A new study draws a direct correlation between keeping customers happy and making big money.

The link between customer satisfaction and financial success is a lot more than anecdotal, according to a report released Tuesday.

The University of Michigan's American Customer Satisfaction Index, or ACSI, reflects Americans' sense of approval about some of the country's most famous companies and brand names during the first quarter of 2005. And it concludes that companies that concentrate on meeting customers' needs are the ones most likely to make sales and lure new devotees.

The most stark reflection of that fact is the correlation between the near doubling of revenues by both Google and Yahoo and their dominance of the search engine and portal categories, respectively, that researchers put them in.

"It's not a surprise that Google and Yahoo not only do a great job at satisfying their customers but are also both financial successes," said Larry Freed, president and CEO of ForeSee Results, which co-sponsored the report. "So that's a great testament to customer satisfaction."

The flip side to the success of Google and Yahoo, explained Freed, is the smaller advances in revenues and satisfaction ratings received by the two Silicon Valley companies' major rivals, MSN and AOL, which, he said, "have had minimal growth, if any at all, in revenue, and trail Yahoo and Google significantly in satisfying their customers."

In the portal category, Yahoo earned the highest rating on the ACSI: an 80, up 8.1 percent from a year ago. By comparison, MSN came in at 75 and AOL at 71. Google led the search category with an 82. Ask Jeeves scored 72 in search.

But while Google and Yahoo are seen as the clear leaders in their categories, their chief rivals are nipping at their heels.

"AOL has incredibly strong content at their disposal," said Freed, referring to the AOL-Time Warner connection, "and with recent announcements of their public interface, AOL.com, they have an opportunity to compete.

That's a surprise, Freed said, because, "It's tough to come back once things look like they're stacked against you. I think AOL can do that, but they've got to take the next step...it's a big step."

At the same time, Freed said, MSN will have a harder time coming back because of a perception that it's losing control of its strength, the desktop.

"The desktop is under attack, and while most people think of Linux as the attacker," Freed said, "I would actually think of Google as much more of a competitive threat."

The study measured customer satisfaction in several other areas as well, including personal computers, automobiles, and news and information.

In the personal computer category, Apple Computer scored 81 and led Dell by seven points. Toyota led the automobiles category with an 87. Honda trailed just behind at 86.

Freed pointed out that the bulk of the online news and information companies scored within two points of each other. That general lack of differentiation in the index between outfits like ABCNews.com, MSNBC.com, CNN.com, USAToday.com and NYTimes.com is as much about their inability to create the same kinds of distinguishing personalities put forth by their print or broadcast formats as anything else.

And Freed thinks it's unlikely the companies will be able to make significant change anytime soon.

"Coupled with the high majority of Web users that get information from portals and search engines, (it) presents a challenge for them to build loyalty and that personality."

The ACSI is a national economic indicator of how satisfied customers are with the quality of products and services available to households in the United States. The evaluations, gathered in a report by the University of Michigan Business School and other organizations, carry a top score of 100.

The ACSI covers a number of industries, including automobiles and appliances. It comes out quarterly, although particular industries are updated once a year. Information is acquired, for example, via telephone interviews and Web questionnaires.

CNET News.com's Ed Frauenheim contributed to this report.

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