Korea's consumer satisfaction higher than US, but improvements required

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By Nam Hyun-woo

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The comparison between customer satisfaction indices of Korean and U.S. industries shows that Korean customers are more satisfied with domestic products and services than U.S. customers with their own country's products, but improvements are still required for domestic businesses.

The Korea Productivity Center (KPC), which surveys the National Customer Satisfaction Index (NCSI) for the country, said this means the quality of products and services is more stabilized in the U.S. in general, but at the same time shows that it is more difficult to satisfy Korean customers, thus requiring domestic firms to strengthen their customer satisfaction efforts further.

According to the KPC, the NCSI of Korean industries in 2020 was 77, which is 2.6 points higher than the 2020 American Customer Satisfaction Index (ACSI) of 74.4. The NCSI is modeled after the ACSI, thus using similar evaluating methodology.

The difference is largely attributable to the wide gap in healthcare, public administration and internet service. In the healthcare industry, the NCSI was 8.6 points higher, followed by public administration in 8.3 points and internet service with 5.8 points.

Except for those industries, however, the KPC said ACSI was higher than most for manufacturing, retail, financial and other directly comparable industrial sectors. For example, ACSI was 1.7 points higher than NCSI in nondurable goods manufacturing, 0.8 points in wholesale and retail, 0.7 points in accommodation and restaurant businesses and 0.4 points in durable goods.

The KPC said this is attributable to product and service quality being more stable in the U.S. than Korea, but extra caution is required because each country's customers have differences in their standards.

“The gap between ACSI and NCSI can also mean that Korean customers have higher expectations for the quality of services or products than the actual quality they feel after buying them, while U.S. customers are more generous in evaluating products and services compared to their pre-use expectation,” the KPC said, adding this means Korean customers are relatively more difficult to satisfy.

It added the NCSI was 13.8 points lower than the ACSI in 1998, but it was 2.6 points higher in 2020, because of Korean firms' continuous efforts to improve customer satisfaction.

NCSI as economic indicator

The NCSI is based on polls of customers who used the products or services of target firms and organizations. Since it is based on direct responses from customers, not only the customer satisfaction score the index shows but also additional data for the index can be used as a handy tool for companies in setting up marketing strategies.

Another benefit of the NCSI is its correlation with other economic indices. According to the KPC, the correlation coefficient between the NCSI and the KOSPI stood at 0.8811 as of November 2020, on a scale from minus 1 to 1.

This trajectory also helps investors to forecast the direction of a company's stock price. If customers are satisfied with a company's products and services, they will make more use of them. The company will then be more profitable and its share price will go up. The result is the opposite if a company's satisfaction index falls.

“The economic achievements and the NCSI correlate very strongly,” a KPC official said. “Since a higher NCSI score indicates that a company has higher chances of economic achievements, businesses should understand that investing more for customer satisfaction can be a breakthrough in an economic slowdown.”