June 2012

UK Customer Satisfaction Index

Championing the Customer Experience

Research by SMG

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UK Customer Satisfaction Index Championing the Customer Experience

Executive Summary
The UK High Street is experiencing a period of flux with the proliferation of e-commerce, store closures and a double-dip recession. Retailers, restaurateurs, industry bodies and the Government alike are urgently searching for answers. Service Management Group (SMG), a customer insight agency, has analysed feedback from 108,048 genuine UK retail and restaurant customers during 2011 to measure how customer satisfaction impacts sales and brand loyalty. This data has been used to create the SMG Customer Satisfaction Index, gauging how well UK retailers are faring across the country. The SMG Customer Satisfaction Index measures the customer experience; the impact of friendliness of staff; availability of assistance and problem resolution and then calculates responses into an overall value. The SMG Customer Satisfaction Index in the UK has a score of 6.1 out of a possible 10. Key findings from the data include:

The value of a smile good customer service increases spend by 39 per cent per sale. Customers who are greeted and receive assistance spend considerably more than those who are not greeted and do not receive assistance. This equates to 45.38 billion in missed sales last year alone due to poor customer service in the UK. Customer service drops throughout the day, and this is having a direct impact on sales. Effective problem resolution builds brand loyalty, increasing likelihood to recommend and return. Customer satisfaction mirrors the Personal Happiness Index*, with customers aged between 25 and 49 the least satisfied with their customer experience. Men in the UK are more likely to complain than women about their customer experience. The worst places in the UK for customer service are Worcestershire, Dorset, Berkshire, while the best places are Herefordshire, Northumberland, and East Yorkshire.

*For more detail on the Personal Happienss Index by The Economist visiit: www.economist.com

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UK Customer Satisfaction Index Championing the Customer Experience

Value of a Smile 39 Per Cent More Spend

While it may be a clich, service with a smile does provide a true benefit and has a real monetary value. When identifying the factors that increase customer spend, the overwhelming response centres on the level of positive interaction customers receive in-store from staff. In the current economic environment, and as the country battles a double-dip recession, the industry is engaged in strong competition with discounts, sales and promotions looking to lure in potential customers. But once the customer is drawn in-store, half the battle is already won. It is at this point that brands need to excel themselves and offer something that differentiates them from competitors. In-store interaction is hugely important, and it needs to occur before customers reach the till.

Figure 1
Value of a smile

No Yes

The graph above highlights the impact staff interaction can have on average customer spend. Customers who receive assistance, on average, spend up to 39 per cent more than those who are not helped by staff. To demonstrate the true value of staff engagement, SMG has calculated the floating pound, and calculated that British retailers are missing out on as much as 45.38 billion each year in sales due to poor customer service (see appendix). This equates to the amount of discretional spend that is available for retailers. These additional consumer spending opportunities will be capitalised on by retailers who have engaged staff, providing high levels of customer service. This is a concerning issue for retailers that are not making the necessary investment in staff training.

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Average Spend

UK Customer Satisfaction Index Championing the Customer Experience Figure 2

Interaction against week day

Average Spend - No Assistance Average Spend - Assistance Average Spend

The chart above highlights the positive impact that staff engagement can have on sales. Staff need to spend more time assisting customers as, in turn, they are more likely to spend more in-store. While there are clear opportunities for staff to improve sales through an engaging customer experience, Saturday and Thursday present the biggest opportunity.

UK Satisfaction on the High Street Going to Extremes

The SMG Customer Satisfaction Index in the UK is 6.1 out of a possible 10. The Index is the portion of customers that were highly satisfied with their experience and gave it a perfect five out of five. While highlighting that staff are, at times, engaging effectively with customers, there is scope to improve the customer experience and increase the Index. As identified in this research, enhanced customer experience leads to an increase in sales. With the rise in destination shopping, customers in the UK are no longer restricted to one high street or retail park. While experiences in UK cities are likely to differ and highlight regional social differences, the brand experience should be consistent for the customer. For example, if a customer from Manchester who is shopping in London has a bad experience with a brand, she will probably choose a different brand (one that differentiates itself from competitors) when shopping back in Manchester. In-store interaction is hugely important, and it needs to occur before customers reach the till.

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UK Customer Satisfaction Index Championing the Customer Experience Figure 3

UK customer satisfaction happiness heatmap*

Overall Satisfaction 60% - 69% 57% - 60% 47% - 57%

York She eld

Dover
Southhampton Plymouth

*The above heatmap takes into account the customer experience from specific store locations rather than customers postcodes.

The regional map highlights that the highest customer satisfaction levels are found at the geographical extremes of the country, including Cornwall, North East Scotland, Northern Ireland, West Wales and East Yorkshire. Ranked against the national average, the best- and worst-performing counties are:

Best-Performing Counties: Herefordshire

SMG Customer Satisfaction Index: + 7.5

Worst-Performing Counties: Worcestershire

SMG Customer Satisfaction Index: - 13.6

Northumberland
SMG Customer Satisfaction Index: + 6.0

Dorset
SMG Customer Satisfaction Index: - 12.2

East Yorkshire
SMG Customer Satisfaction Index: + 5.4

Berkshire
SMG Customer Satisfaction Index: - 11.9

The North-South divide is clearly reflected in overall customer satisfaction. Customers outside Greater London and the south of England can expect more engaged and friendlier staff, which will have a direct impact on overall customer satisfaction.

The SMG Customer Satisfaction Index shows the ranking difference between each region, drawn from the feedback of 108,048 customers, against the national average of 6.1.

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UK Customer Satisfaction Index Championing the Customer Experience Figure 4

Regional staff friendliness

Speed at the till can be detrimental to a customers experience, with slow service leading to frustration and the risk of leaving the store without purchasing. As portrayed in the graph, there is vast difference in the view of a speedy checkout between the regions. As a general rule, consumers outside of Greater London are more highly satisfied with their experiences.

Gold Service
The Olympics will see the UK take to the global stage, and it is an opportunity for Britain to create its very own legacy built on innovation, rich culture and quality experiences. There are three million people working in the retail and leisure sector, and VisitBritains visitor forecast reveals the UK should attract 30.7 million visitors in 2012, fuelled by this summers events such as the Jubilee, Wimbledon, and of course the Olympics. It is now more important for stores to invest in training staff to appropriately engage with customers and solve any problems that may arise. However, the spotlight will be on London, with a wide variety of flagship stores, to deliver exceptional customer service to tourists and create brand ambassadors. In turn, this will create absolute loyalty, fostering a brand experience that customers will recommend and want to relive when they are home, especially as many UK brands now have stores overseas. Recommendations from trusted sources is one of the key drivers for new customers.

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% of Consumers Highly Satisfied

City of London Greater London Rest of the UK

UK Customer Satisfaction Index Championing the Customer Experience

Best Time to Shop 11 Oclock

The logic that all retailers should deliver a consistent customer experience throughout the day is not a reality for customers. Customers are most likely to be greeted and receive assistance before 11am. However, with key factors that drive customer satisfaction dropping throughout the day, this will have a detrimental impact on sales.

Figure 5
Customer experience against time of day % of Consumers Highly Satisfied % of Consumers Highly Satisfied

Overall Satisfaction Friendliness of Employees Availability of Assistance Cleanliness

Overall satisfaction levels mirror the trend for friendliness, availability and shop cleanliness. There is an after-work customer urge to splurge with the average spend at its highest of the day. This is not being capitalised on, with staff friendliness, availability and cleanliness on the decline at this vital time when customers want to spend more. The debate around longer opening hours is constantly on the agenda. However, while this may support the consumer spend trend, retailers will need to address the drop in customer experience to avoid creating a decline in customer loyalty.

Figure 6
Customer experience across the week

Overall Satisfaction Availability of Assistance Cleanliness Speed at the Till

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UK Customer Satisfaction Index Championing the Customer Experience

Similarly, at the weekend, Saturday holds the biggest opportunity for the retail and restaurant industry, as it is a period when the majority of customers will be shopping. However, customers are generally less satisfied on the weekend, especially when it comes to speed at the till. Due to the influx in customers at this time, there are likely to be longer queues causing customers to have a poorer customer experience. The data shows that staff are offering lower levels of service and not maximising the potential increase in spend. Overall, this is creating more problems for retailers, as without staff being at the top of their game at the weekend, it is likely that the number of complaints will increase, damaging loyalty and creating dissatisfied customers. It is absolutely natural, of course, that from time to time the customer experience is not consistent. But the research highlights that this is not a one-off and all aspects of the customer experience are declining throughout the day.

Dealing with Complaints Revolutionary Thinking

Conventional wisdom has it that people in the UK generally do not like to complain at the time of service. With the proliferation of social media, customers are likely to go home and discuss the experience with friends and family online and reach a wider audience through the likes of Twitter and Facebook. This illustrates the growing importance for brands to develop a seamless customer experience online and offline to avoid disconnect with customers. Forward-thinking brands aim to establish a strong customer feedback channel so that they can improve service in the moment. Interestingly, the formula for absolute loyalty is not a perfect customer experience, but it is created when brands are put to the test and deal with customers and their issues on a personal level.
Figure 7
Problem resolution impact

No Problem Experienced Highly Satisfied with Problem Resolution

This graph highlights how customers who are highly satisfied with the resolution of their problem rate the overall experience higher and become more loyal to the brand. Problem resolution can clearly build brand loyalty and increase the likelihood that customers will not only return but also recommend.
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% of Consumers Highly Satisfied

UK Customer Satisfaction Index Championing the Customer Experience

Below is a genuine customer response from a large pet supplier, which is a prime example of how dealing with customer problems appropriately can have a lasting impact on satisfaction, likelihood to recommend and sales. I came in with a faulty pump for my fish tank. The staff sorted out the problem with the pump and it was not necessary for me to purchase a new one (however I did purchase other items for my dog and bird table!). I found the staff extremely helpful, knowledgeable and enthusiastic about their work!

Personal Happiness The Middle Muddle

The Personal Happiness Index supports the concept of Gross National Happiness, which has been used by governments to support the policy-planning process in order to measure levels of contentment in the nation. It highlights the U-bend effectthat happiness and enjoyment decline as people approach 30s and 40s, while younger people and those above 55 are at their most content. Interestingly, the research by SMG mirrors the Personal Happiness Index and the graph below highlights the satisfaction levels of UK retail customers. Customers aged between 25 and 49 are the least satisfied group with their customer experience. The factors that make customers satisfied, or dissatisfied, can be attributed to a variety of external and internal factors. These include: employment status; ambition; uncertainty; children and disposable income. It is likely that this age group sets higher expectations on their journey to pursue happiness as they plan for their future.

Age split on satisfaction and service

Overall Satisfaction Receive Exceptional Service Friendliness of Staff

Retailers need to be aware of the varying customer demographic expectations. While the younger and older generation may have a reputation for being less satisfied, in reality, customers under 18 are much more likely to say that they had exceptional service during a shopping experience. It is down to store managers to re-educate their staff on these misperceptions and the importance of addressing each age group with the appropriate level of engagement. This is especially true when you realise that the 55+ age group has the highest disposable income.
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% of Consumers Highly Satisfied

Figure 8

UK Customer Satisfaction Index Championing the Customer Experience

Satisfaction The Problem with Sex

Although everyone has individual customer requirements, women are generally happier and more likely to return, recommend and report a better experience. Despite some misconceptions, the research has found that in the UK, men are more likely to experience a problem than women. Brands can build long-term loyalty through a positive experience with female customers, because they are more likely to recommend the store or restaurant to their friends.
Figure 9
Male versus female satisfaction

Female Male % of consumers highly satisfied / Highly Likely Figure 10

Male versus female problem resolution

Female Male % of Consumers Experiencing a Problem / Highly Satisfied with Resolution Service Management Group, Inc. and/or Service Management Group Ltd.

UK Customer Satisfaction Index Championing the Customer Experience

Recommendations Engage to Encourage Spend and Satisfaction

The SMG data provides the customer view of their repeated encounters with retailers. Despite the widely acknowledged mantra that the customer is king, the UK retail and leisure industry is not spending enough time and effort understanding its customers or on training staff to meet their needs and expectations. In not doing so, it is missing the opportunity to increase revenues and make more money. Now is the time to understand the direct correlation between face-to-face customer service and customer satisfaction. The industry needs to address the gaps in friendliness and engagement at key peaks of potential customer spend in order to increase long-term success. In short, the industry needs to go back to basics and engage with customers so that staff can switch on, rather than turn off, customers. Key recommendations for retailers to consider in order to improve the customer satisfaction levels include:
Encourage the staff to use open questions and statements, such as: If you need anything today, just ask to prompt requests for assistance and help. Highlight the impact of friendliness and assistance on sales and customer satisfaction levels to the staff. The staff make the biggest impact on the overall satisfaction score. The notion of staffIess stores undermines the customer retail experience, and this should be considered when exploring new design options. A consistent brand experience across all channels and all timeframes is important to improve loyalty and customer satisfaction. Reassurance by the staff to queuing customers that they are doing everything in their power to keep them moving is just as important as store design. Adopting a snake queue system can be effective. For customers the benefits are that it has the perception that it is moving fast, and crucially, that it is absolutely fair with no risk of being served out of turn. Customers will be more understanding and patient if they are recognised and dealt with accordingly. The staff should acknowledge potential customers immediately, either with a simple hello or by stating that they will be with them shortly. Product availability is occasionally an uncontrollable factor. However, using product knowledge, the staff can offer a realistic alternative.

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UK Customer Satisfaction Index Championing the Customer Experience

Methodology
Continuous customer insight programmes are used regularly by a range of retail and leisure outlets across the UK. Data is collected when a customer completes an online feedback form to respond to questions relating to the entire customer journey. SMG is able to conduct deep analysis into the data captured and can provide detailed summaries on the variables that impact the customer experience, positively and negatively, across regions, specific aisles, time frames, basket size and transaction levels. The ability to capture genuine feedback from real customers in real time enables organisations to gain a better understanding of their customers and create tangible action plans to address their needs while meeting their business objectives. SMG (Service Management Group) is the leading international customer experience research firm. Driving business results by partnering with brands to improve customer loyalty and employee engagement, SMG provides actionable insights and recommendations both the front-line and senior executive levels. SMG has developed a proprietary suite of research services combining world-class technology with unmatched industry expertise. Each year, the firm evaluates over 70 million customer experiences in 64 countries and 29 languages for more than 200 brands.

Appendix
Calculation of floating pound In 2011, the UK retail sales totalled 303 billion and, given the SMG customer satisfaction level in the UK is 6.1 (61.6%), we can assume that: - 186.65 billion in sales were from highly satisfied customers - 116.35 billion in sales were from not highly satisfied customers In the SMG research, it has been identified that the value of a smile and quality customer service will increase sales by 39 per cent. Therefore, if the all customer in the UK received quality customer service, the value of these sales would be increased to 161.73 billon. This means overall retail sales in 2011 could have been as high as 348.38 billion. If UK customer service was outstanding, the retail industry could experience a 15 per cent growth in total retail sales in real terms, 45.38 billion.

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