By Daniel Hunter

In the face of tough trading conditions, the retail industry continues to improve its customer service, strengthening its position at the top of the latest UK Customer Satisfaction Index (UKCSI).

The UKCSI is the national measure of customer satisfaction, from the Institute of Customer Service (ICS), which gauges the quality of UK customer service through 26,000 consumer responses each year.

The non-food retail sector achieved the greatest increase in customer satisfaction to score 85.2 (out of 100) in the latest Index, stretching its lead over other industries.

High street stalwarts John Lewis and Debenhams made significant gains, but the rise was also buoyed by online fashion retailer ASOS. A newcomer to the Index last year, ASOS has surpassed Amazon’s record UKCSI rating of 91.7 by 1 points (scoring 92.7 in the latest Index).

Online organisations generally performed strongly, with First Direct and Amazon joining ASOS in the top five firms for customer service.

Overall, the UKCSI was up 0.8 points year on year, to 78.2 out of 100, continuing the upward trend in satisfaction levels across the UK.

Food retail was the second-best performing sector (82.1), with services narrowly behind (82). Automotive (81.3), leisure (80.7) and tourism (80.5) also scored highly. The financial services industries scored 78.8 (insurance) and 78.0 (banks).

Sectors registering below-average scores included local authorities, national government services, telecommunications, transport and utilities, all of which were rated between 72 and 75.

Jo Causon, Chief Executive of the Institute of Customer Service, comments: “The continued improvement in UK customer satisfaction reflects a keen awareness that in a difficult economic climate, service is a key market differentiator.”

Non-food retail

The best-performing sector, non-food retail, also registered the greatest increase in customer satisfaction. The industry scored 85.2 compared to 81.9 the previous year.

Not only did ASOS set a new record for the Index (92.7), but John Lewis achieved the second highest ever score (92.3) — up 6.4 points year on year.

Although Amazon dropped 2.1 points to slip to third in the sector table and fifth overall, the online retailer still scored an impressive 89.6. Debenhams rose one place in the sector standings, improving 3.3 points to overtake Marks & Spencer (85.9).

Food retail

Waitrose (89.9) and Iceland (87.0) were the strongest performers in the food retail sector.

Not only did they significantly outstrip the sector average (82.1), they also replaced Marks & Spencer at the top of the sector table. Year on year, Waitrose added an impressive 5.3 points to its customer satisfaction score, Iceland 4.5 points.

The latest UKCSI results show a strong correlation between customer satisfaction and market share in this highly competitive industry.

Food retailers that scored higher than their sector’s average in the UKCSI experienced an average year on year sales growth of 9% and market share growth of 0.02% (between January 2012 and January 2013). By contrast, those performing below average saw sales rise by an average of 4% and market share drop by an average of -0.05%.

Jo Causon comments: “Service quality is strongly linked to market share performance in the grocery sector, indicating the tangible impact customer service has on a company’s bottom line.”

Utilities

Although still the lowest-performing sector on the UKCSI, utilities (72.4) has arrested a downward trend in customer satisfaction. The majority of utility firms improved their scores, with water companies in particular seeing significant climbs.

Water provider United Utilities (74.5) recorded the sector’s largest rise in customer satisfaction: the firm rose seven places to third position on the sector Index, its score increasing by 5.7 points.

Anglian Water (74.2), E.ON (74.3) and Severn Trent Water (69.7) also significantly improved their customer satisfaction scores.

Banks and building societies

The top three performing banks and building societies have stretched their lead over the competition in the latest Index.

Last year’s leading organisation, First Direct, added 3.6 points, taking its customer satisfaction score to an impressive 89.9. This increase was surpassed only by the 5.7 point improvement made by The Co-operative Bank (86.9). In third position, Nationwide (85.4) was the top-performing building society, recording a rise of 2.7 points.

There is a clear correlation between service performance and customer recommendation in the retail banking sector. On average, an increase of one point on a bank’s Index score equates to an additional 1.6% of customers recommending the institution.

The top three performers in the UKCSI are the most likely to be endorsed by their customers: more than half (51%) of First Direct customers have recommended their bank.

At the other end of the scale, the lowest-ranked bank on the UKCSI, Tesco (70.3), can count only 17% of its customers as advocates of its service.

Insurance

The link between customer satisfaction and recommendation is also evident in the insurance sector, where an extra point on the UKCSI equates to 1.1% more advocates.

The latest results also show a link between customer satisfaction and repeat business for insurers.

On average, one additional point is worth 1.4% more customers with two or more policies. In addition, satisfied insurance customers are less likely to shop around when renewing policies.

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