[The following article appears in the April 1995 edition of _Public_Sector_Quality_Report_, pages 4 and 5.] ACSI New Economic Index Takes Measure Of Customers Next time your favorite news broadcaster recites the familiar litany of economic indices--durable goods production, consumer price fluctuations, unemployment, etc.--don't be surprised to hear a new number tossed into the mix--an indicator which measures the quality of U.S. economic output. In late 1994 the University of Michigan's National Quality Research Center (NQRC) teamed with the American Society for Quality Control to unveil the American Customer Satisfaction Index (ACSI). Patterned after the Swedish Customer Satisfaction Barometer, the ACSI is an attempt to measure customer satisfaction regarding the quality of goods and services (including some government services) purchased in the United States. ACSI numbers are generated quarterly via telephone interviews with 46,000 consumers. Seven broad economic sectors are covered: manufacturing (durables and nondurables), retail, finance/insurance, transportation/communications/utilities, services, and public administration/government. ACSI breaks the broad sectors down into 40 industries (within "services," for example, industries studied are hospitals, hotels and motion pictures). Within those industries, a total of 203 companies/agencies are evaluated. The complex econometric model used to compute ACSI links customer satisfaction to several key "determinants," including customer expectations, perceived quality and perceived value. Its developers say ACSI data should help boost the public's perception and understanding of quality as a factor in U.S. economic activity. Moreover, they see ACSI as a complement to other macroeconomic indices, one that will serve several "national objectives," including: -- Establish links between customer satisfaction and declines/gains in the U.S. economy. -- Fill a "missing link" in the ability to understand and interpret price, productivity and profitability measures. -- Allow quality-based comparisons of goods and services produced in the U.S. with those from foreign countries. -- Enable sector-to-sector, industry-to-industry, even organization-to-organization comparisons of customer satisfaction. (ACSI organizers say company-specific numbers will not be made public. However, an organization that becomes an ACSI sponsor gets confidential reports and software which show how it stacks up to competitors on such factors as customer expectations, perceptions of quality, customer complaints, customer retention. Sponsors-currently there are eight-pay a $25,000 annual fee.) Within the government sector, ACSI's designers chose to focus on what they call "a small number of federal and local agencies with which a majority of household consumers can be expected to have had some first-hand contact and experience within the past several years." Given those parameters, the three government "industries" tracked by ACSI include the Internal Revenue Service, garbage/trash service (segmented by "central city" and "suburban" subcategories), and police (again, both central city and suburban). In addition, the quasi-governmental U.S. Postal Service (USPS) is lumped under two industries: USPS monopoly services (mail delivery, post office counter services) and express mail/package delivery. Except in the case of USPS express mail/package delivery, survey organizers concede that the detailed comparison and modeling data available to corporate sponsors are not available to government agencies covered by the index. In fact, Dr. Barbara Everitt Bryant, a research scientist with the University of Michigan, says the primary reason for adding a public sector component to the ACSI "is because government is 12 percent of GDP (gross domestic product) and we wanted this to be reflective of our total economy." She adds that government results, as currently reported, are useful primarily as generalized measures against which an individual public agency might judge itself. October was the first ACSI survey, and government didn't fare well. Among the seven sectors, on a 100-point scale, the overall ACSI score was 74.5, with manufacturing/nondurables leading at 81.6 and government coming in last at 64.3. Within government, garbage/trash service rated highest (74, both suburban and city), followed by suburban police (65), city police (61), and the IRS (55). Interestingly, IRS and USPS/mail delivery (60) had the two lowest scores among all 40 industries. The USPS scored higher (69) in express mail/package delivery, but even that score was well below the 81 recorded for the express/package delivery industry as a whole. Also, given the monopolistic nature of their activities, the IRS and USPS have the unenviable distinction of being the only two organizations which the ACSI identifies by name. In other words, company-specific ratings for Sprint, MCI and AT&T are concealed by an overall industry label "phone/long distance." Apparently, ACSI organizers felt generic labels like "tax enforcement/ collection" and "mail handling/delivery" would have been rather transparent to readers of the index results. In commenting on the first ACSI, ASQC and NQRC officials offered several observations. For starters, they noted that the service sector of the U.S. economy, while dominant in terms of size and growth, is not measuring up to manufacturing in terms of quality. They also noted that service industries where competition exists--long-distance phone and overnight delivery--tended to rate much higher than "protected industries" (USPS/mail delivery being offered as an example.) "ACSI is an economic indicator we feel is needed," notes Everitt Bryant, "because all of our government-provided indicators measure quantity or price, or some combination, like productivity. We think quality matters, and that's not being measured by the present indicators." Plans call for the overall ACSI score and selected industries to be updated quarterly. For first quarter 1995 the overall ACSI was off .4 percent, which according to ACSI officials might be viewed as signaling a U.S. economic slowdown. The two industries updated during the first quarter, retail and finance/insurance, both recorded 2.8 percent declines in customer satisfaction. CONTACT: Dr. Barbara Everitt Bryant, research scientist, University of Michigan School of Business Administration, (313) 763-9767. [For further information about PSQR or to subscribe, contact: Public Sector Quality Report 17733 Kingsway Path Lakeville, MN 55044-5209 Phone: (612) 898-5058 Fax: (612) 892-7710 e-mail: 74363.3644@compuserve.com]