Are Customer Expectations Really Sky-Rocketing?
G. Tomas M. Hult
A near-consensus among business and marketing professionals seems to have emerged: the expectations of consumers are rising rapidly, dramatically, and across the board. The specter of “sky-rocketing customer expectations” is often referenced as a warning to marketing professionals and companies as a whole: fail to meet these lofty and ever-increasing consumer demands, and it could mean financial doom.
In some ways, the paradigm-shifting technological innovations of the last 25 years have made consumers spoiled and their expectations unrealistic, so the argument goes. In the age of Amazon—a firm that has revolutionized variety of offerings delivered fast and efficiently via a single channel—any company that fails to keep pace with such a trillion-dollar behemoth is headed for failure, especially in these COVID-19 times.
But have expectations really been spiraling out of control, constantly racing upward, and forcing firms to strive for new, perhaps unachievable heights? Are customer expectations really “higher than ever before?” And will these expectations be altered by consumers due to the coronavirus pandemic?
Proclamations suggesting the dramatic increase in expectations are pretty universal, but reliable data confirming their existence are much harder to come by. The scientific ACSI model includes a measure of customer expectations, a multi-dimensional variable that has captured the dynamics of national-level customer expectations, along with expectations of product/service reliability and customization, each quarter since 1994.
The expectation metric is based on consumer data from all industries and economic sectors which is then aggregated to the national level to better understand trends. And the timing of the ACSI expectations metric is, in many ways, ideal; it spans from a time when the internet and related information technologies were still very young and had relatively little impact on the economy (1994, coincidentally, the year Amazon was founded) to the present time when the internet, e-commerce, and other Information Age innovations that radically altered customer service delivery had already “changed everything” for consumers.
ACSI data provide some evidence of rising consumer expectations among American consumers over this period. Figure 2.1 shows data for aggregate national customer expectations across all major consumer sectors and industries in the U.S. economy since 1994 (from the The Reign of the Customer: Customer-Centric Approaches to Improving Satisfaction), measured on a 0–100 scale. As this figure shows, national customer expectations scored 76.9 on the 0–100 scale when first measured in 1994. In the intervening years, expectations have generally trended upward, with a few periods of significant decline mixed in. All told, expectations have increased 3.0 points on a 0–100 scale to 79.9, a substantial and statistically significant 3.9% increase over the period.
If we focus on a slightly shorter time frame, customer expectations can be argued to have increased even more. Expectations declined to a low of 75.4 in 1997, a few years after the ACSI project began, and from that point forward have increased to the current score of 79.9, an even bigger gain of 4.5 points (6.0%). Thus, consumer expectations appear to have indeed increased significantly over the last 25 years.
However, several finite trends within this data stand out, and these should perhaps temper our confirmation of the prevailing wisdom vis-à-vis runaway consumer expectations. First, if we focus on only the most recent five years of data—which includes the period when the most dramatic quotes about runaway expectations were offered—expectations have actually declined slightly, down almost a full point over that period from 80.7 to 79.9. In other words, for those CEOs and CMOs fretting about exploding and unmanageable consumer expectations, the trend seems to have stalled over the last few years, and has even reversed slightly.
While this dip could portend either a prolonged decline in expectations or just a temporary adjustment followed by renewed growth moving forward, as of now consumers’ expectations have flattened out, and are at about the same level they were in 2011. That said, COVID-19 has created a large unknown in how expectations and satisfaction will trend in the future; so far, satisfaction and expectation levels hold steady as we are in July 2020.
As a caution, it is important that we do not overemphasize a three-point improvement, or increase, in the customer expectations variable, as it must be viewed relative to changes in other consumer perceptions. That is, while customer expectations are significantly higher over the last 25 years, over the same time period customer satisfaction is up nearly as much (+2.5 points), and consumer perceptions of value are up much more (+6.7 points). This indicates that companies are, by and large, keeping pace with advancing customer expectations by offering both a stronger value proposition and more satisfying experiences.
Figure 2.2 compares the changes in customer expectations, perceived quality, perceived value, and customer satisfaction (ACSI) since 1994 (from the The Reign of the Customer: Customer-Centric Approaches to Improving Satisfaction). From this data, the most important take-away vis-à-vis the “theory of skyrocketing expectations” is that while they have in fact grown, they have not done so to such an extent that companies cannot keep pace and provide satisfying experiences. Indeed, as customer expectations have increased, companies have managed to meet these rising demands with (roughly) equally stronger customer satisfaction.
In addition, it is important to remember that expectations are always formed by consumers within a particular context and tend to vary significantly—both in their levels and in their movement over time—across diverse economic sectors, industries, and companies. Yet much of the worry about rising consumer expectations seems to imply the outright claim that the phenomenon is all-encompassing and economy-wide, impacting industries of all shapes and sizes more or less equally. An investigation of the varying levels of expectations across diverse industries and the largest gainers and losers over the past decade reveals that consumers are not anticipating more from every industry, nor do consumers expect as much more from some industries as they do from others.
In sum, while ACSI data confirms that customer expectations have increased over the past 25 years, and that consumers do indeed appear to demand more from the companies from which they purchase, when viewed in context it is difficult to characterize this growth as out-of-control, unprecedented, equally distributed across economic contexts, or beyond the capacity of firms to manage adequately. As has happened since the dawn of the market economy, consumers have come to expect new innovations introduced by some particularly creative companies to become part of the regular product and service offerings of all companies competing in that industry, even innovations that were once (in some cases, quite recently) almost unimaginable.
But while the scope and pace of these innovations may seem different, and thus give rise to a misconception that consumers have developed unrealistic, “higher-than-ever” expectations from the firms with which they do business, the reality is somewhat less dramatic. Most importantly, companies seem to be responding well in general to the climb in customer expectations.
This ACSI Matters Blog is a modified excerpt from the ACSI expert team‘s 2020 book – The Reign of the Customer: Customer-Centric Approaches to Improving Satisfaction – covering 25 years of data, insights, tools, and managerial implications related to customer satisfaction and customer asset management.