Food retailers facing customer satisfaction challenge amid price war

31st Aug 2015

Only one sector has more satisfied customers than the retail food sector according to the UK Customer Satisfaction Index (UKCSI), from The Institute of Customer Service. Despite this performance, the sector has seen customer satisfaction drop, with the recent shakeup of the industry posing problems relating to how it maintains a strong reputation for customer service and increases customer loyalty in future.

Although still the second highest scoring sector for customer satisfaction other sectors are closing the gap fast. Retail food is now narrowly (0.4 points) ahead of the Tourism sector and losing considerable ground (only 1.1 points ahead) to the rapidly improving Banking sector.

Waitrose is the highest scoring organisation in the sector and is positioned sixth in the top 50 organisations from all sectors. Other Retail Food sector organisations that made the top 50 were Aldi, Ocado, Iceland, Asda and Sainsbury’s. Iceland is the only Retail Food organisation in the top 50 to improve its score since July 2014, while Lidl and Aldi have the highest proportion of customers that have recommended them in the last six months.

Organisations in this sector are currently embroiled in an aggressive price war, which might be seen as positive for customers, however our research suggests that the vast majority of customers would prefer a balance of customer service and price. Some would be happy to pay a premium for the best customer service, but it is a minority that would prefer to sacrifice customer service for the lowest prices. In such a competitive market organisations need to be focused on scoring at least 9/10 across customer service metrics in order to maintain the loyalty of these customers who value strong service.

It remains a leader in many respects, scoring above the overall UKCSI average on all but one measure, dealing with customers over the phone. It also has the lowest proportion of customers that had to escalate their complaint and smallest difference between the best and worst performing organisations.

Yet again, organisations in this sector show the most direct link between customer satisfaction and business’ bottom line. Food retailers that have a customer satisfaction score at least one point above the sector average of 79.7 delivered average sales growth of 5.5% in the 12 weeks to 26th April 2015. In comparison, organisations that scored at least one point below the sector average have seen sales decrease by 1%. This might help to explain why the Retail Food sector has seen growth slow to 0.2% over the same period.

The infrastructure that has led to the sector scoring so highly in previous years appears to remain firmly in place. For example, when there is a complaint the Retail Food sector scores well above the all-sector average for resolving it. It also has the lowest proportion of people that said they needed to escalate their complaint, compared to the UKCSI average of 41.3%.

“The Retail Food sector has a great tradition of satisfying customers. This is after all one of the main differentiators with many selling the same products and customers that can very easily shop elsewhere if they have a poor customer experience”, says Jo Causon, CEO, The Institute of Customer Service.

“Despite this tradition, the sector now faces a challenge. With challenger brands making real inroads into the customer base of larger retailers and advances such as social media allowing customers to hold companies to account much more easily, a sustained focus on customer service across the whole value chain, with greater customer insight and personalisation, has to be a principal focus to avoid a nil sum game focused purely on pricing policies.”

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