Market Share Underdogs No. 1 in Customer Satisfaction

Reebok, Pepsi Lead Nike, Coke in Quarterly Survey

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CHICAGO ( -- Reebok has overtaken Nike in the athletic-shoe business, and Coke came in last among soft-drink marketers -- at least in consumer satisfaction, according to the latest update from the University of Michigan's American Customer Satisfaction Index.
Pepsi and Reebok beat out Coke and Nike in the National Quality Research Center's quarterly consumer satisfaction survey.
Pepsi and Reebok beat out Coke and Nike in the National Quality Research Center's quarterly consumer satisfaction survey.

Nike and Coke may be the share leaders in their respective categories, but Nike's been bested by rival Reebok and Pepsi pushed further ahead of Coke in the quarterly survey conducted by the university's National Quality Research Center.

"These companies seem to be parting ways," said Claes Fornell, the center's director and professor-business administration at the University of Michigan's Ross School of Business. "Usually, we see a regression toward the mean ... where everybody tends toward sameness. All of a sudden we have gaps occurring and possibly for good."

Nike vs. Reebok
Over the past decade, share leader Nike and Reebok have never been separated by more than two points. But price increases likely eroded consumer satisfaction across the entire industry last year, Mr. Fornell said, improving customers' perception of Reebok's value for the money compared to the competition. Its rating moved up 4% to 78 (out of a possible 100), while Nike slipped 4% to 72, its lowest score ever. Now Reebok has a six-point lead over Nike; only Google, Southwest, eBay and Wachovia enjoy leads at least that large in their industries.

In the soft-drink category, Pepsi's rating improved 5% to 86, its second-highest score, while Coke fell 2.4% to 82, its second-lowest score. That's the largest gap between the two brands since the survey started. Pepsi tied with Cadbury Schweppes, maker of 7Up and Dr Pepper and the industry's best-rated marketer historically. (Cadbury in 2003 received a score of 89, the highest score for the category.)

"I think this has much more to do with Pepsi than it does Coke," Mr. Fornell said. "We find that Pepsi seems to be more aggressive than Coke in innovation."

Pepsi's commitment to innovation
He pointed to Pepsi's improved perception of innovation and investment of marketing resources for Diet Pepsi as helping reinforce its commitment to innovate and rely less on price promotion. Indeed, Pepsi, with its more diverse product portfolio, which includes share-leading noncola brands such as Mountain Dew, Gatorade, Aquafina and Tropicana, appears to have a greater halo than Coke, which in 2006 rolled out new marketing campaigns for its cola portfolio and carbonated soft-drink line extensions such as Coke Blak and Coke Zero. Coke's score fell even as it launched new energy drinks such as Full Throttle and Tab Energy and a line extension for its Powerade sports drink.

"Folks in the U.S. vote for their favorite soft drinks every day when they buy them, and they continue to make Coca-Cola, Diet Coke, Sprite and Fanta the No. 1 soft drinks in their respective categories year after year," said a Coca-Cola spokesman, noting that scores tend to oscillate from year to year.

The American Customer Satisfaction Index research team interviews consumers by phone on a quarterly basis for 43 industries and more than 200 companies. Mr. Fornell wouldn't share the specific questions consumers are asked in the survey but said the team interviews a minimum of 250 customers for each company to determine their expectations. Those expectations are compared to a hypothetical ideal and a general question on consumer satisfaction. Overall customer satisfaction remains at an all-time high of 74.4.

Unreliable relationship
Critics of satisfaction surveys argue there is an unreliable relationship between satisfaction and customer behavior. However, marketers liberally cite the ASCI and similar surveys in marketing and investor communications.

Because nondurable goods such as footwear and soft drinks are relatively inexpensive and purchased with greater frequency, customer satisfaction in those categories tends to be higher and perhaps more difficult to gauge than it would be for a big-ticket item. "Changing your toothpaste is a lot easier than changing what car you drive," Mr. Fornell said.

Of the 38 named companies in the survey, Sara Lee, Kellogg, Pepsi and Rebook showed the most year-over-year improvement in their scores, each up between 4% and 5%. Segment leaders Heinz in food, Reynolds in cigarettes, and Clorox in personal care and cleaning each held the top spots despite flat or declining scores. Heinz's rating dropped 4% to 87. Overall satisfaction in the consumer nondurable group improved 0.6% to 82.3, the highest rating of the 10 sectors measured in the index.

Happy holidays?
That bodes well for brands as we enter the holiday season, Mr. Fornell said. "These results would suggest a more optimistic forecast than what we see from other analysts, at least short term," he said, noting that most signs point to a slowing economy. However, he countered that consumer confidence, while flat this quarter, is still up on an annual basis; gasoline prices are dropping; and interest rates have yet to rise. Meanwhile, household income and borrowing continues to rise.

"I would not count consumers out on this yet," Mr. Fornell said. "In the short term, this probably will lead to more spending over the holiday season, and better than last year. This year, looking at those factors, I think it looks better than what many people are suggesting."

The ACSI is forecasting a 3% increase in spending for the third quarter, consistent with the Commerce Department's preliminary estimate of 3.1%.
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