American Customer Satisfaction Index (ACSI): Overview

What Is the American Customer Satisfaction Index (ACSI)?

The American Customer Satisfaction Index (ACSI) is an economic indicator of U.S. consumer sentiment that is based on a nationwide survey in which U.S. consumers are asked to rate the products and services that they use.

Understanding the American Customer Satisfaction Index (ACSI)

About 500,000 consumers are quizzed annually for the index, which rates customer satisfaction with more than 400 companies across more than 40 industries. The American Customer Satisfaction Index produces four levels of indexes or scores—a national customer satisfaction score, 10 economic sector scores, over 40 industry scores, and scores for individual companies as well as government agencies. The ACSI is an important indicator of economic performance for individual firms as well as the macroeconomy.

The ACSI uses information gleaned from about 500,000 customer interviews as inputs to a multi-equation econometric model developed at the University of Michigan. The index was first published in Oct. 1994 and is updated quarterly on a rolling basis, with new data for one or more economic sectors replacing data collected the previous year.

ACSI data is used by businesses in planning and capital budgeting, by researchers analyzing consumer behavioral trends, and by policymakers who use it as an indicator of the health and direction of the economy. Investors keep an eye on the numbers for individual companies and industries.

A company's ACSI score is derived from a questionnaire. Each question entails a 1-10 rating scale to rate a company, government agency, or other entity. Organizations are rated on the following:

• Overall satisfaction (1 means "very dissatisfied" and 10 means "very satisfied")
• Expectancy disconfirmation (1 means "falls short of expectations" and 10 means "exceeds expectations")
• Comparison to an ideal (1 means "not very close to the ideal" and 10 means "very close to the ideal").

In its history of over 25 years, the ACSI hit its highest level of 77 out of a possible 100 during the first quarter of 2017. It repeated that high score in the third quarter of 2018. The score took a sharp turn for the worse in the fourth quarter of 2020, dropping to 73.7. The survey authors noted that the COVID-19 pandemic may have exacerbated the discontent, but also said that the score had dropped in eight out of the nine previous quarters and had hit its lowest level since 2005.

ACSI: Key Findings

With over two decades of experience collecting consumer satisfaction information, the ACSI has made a list of key findings based on its research:

• High customer satisfaction correlates to better company financial performance.
• Changes in customer satisfaction affect the willingness of households to make purchases. (Price-adjusted ACSI is a leading indicator of consumer spending growth.)
• With consumer spending accounting for ~70% of gross domestic product (GDP), changes in customer satisfaction correlate to GDP growth.
• ACSI scores for manufactured goods (food items, appliances) are generally higher than those for services (airlines, banks, cable television).
• Quality is more important than price in nearly every industry measured by the ACSI. Price promotions may work over the short term in raising satisfaction but price cuts are not sustainable in the long term. Companies that focus on improving quality tend to do better in the long run.
• Merger and acquisition activity generally has a negative effect on customer satisfaction, especially with services.

ACSI and Investing

ASCI reports may have the power to move markets. Stocks of companies with high ACSI scores tend to do better than those of companies with low scores, while the national ACSI score has been shown to predict trends in both consumer spending and stock market growth. Exchange-traded fund (ETF) developers use ACSI data for the construction of their portfolios.

A 2016 study found "convincing empirical evidence" of the importance of customer satisfaction in producing stock returns. The study's authors used 15 years of audited returns for companies and found that they produced 518% more returns between 2000 and 2014 compared with a 31% increase in the S&P 500.

To invest in the index, one would have to invest in an exchange-traded fund (ETF) that tracks the index. The American Customer Satisfaction (ACSI) ETF does just that.

The Bottom Line

The American Customer Satisfaction Index (ACSI) is an economic indicator that gauges how satisfied U.S. customers are with the products and services they use. Research has shown that companies with high ACSI scores perform better in the stock market than those with lower scores. Investing in the ACSI index is possible by investing in any ETF that tracks the index.