CUSTOMER SATISFACTION FALLS WHILE PROFITS INCREASE

Extracting more from customers while delivering less is not a mark of a well-functioning economy

U.S. overall customer satisfaction has dropped for three consecutive quarters according to the American Customer Satisfaction Index (ACSI^®). As of the second quarter of 2025, the national ACSI score is down 0.1% to 76.9 (on a scale of 0 to 100), which is roughly the same level it was 12 years ago. Its trajectory back then pointed to a much higher level, albeit not without some volatility.

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ACSI 1994-2025

In strong competitive markets, sellers are rewarded for treating their customers well and punished when they treat them poorly. Economic data show that markets have failed in this regard. Despite stagnant or lower customer satisfaction, net profit margins have increased by 3-4% over the past decade to about 11% earlier this year. Consumer prices have risen more than producer prices. In addition, corporate profits have had a higher growth rate than gross domestic product (GDP). As sellers accumulate more pricing power, customer satisfaction suffers.

U.S. GDP and ACSI are complementary gauges of economic health. ACSI is a companion to GDP in that it measures quality (relative to price) of economic output, as determined by the users of that output. GDP measures quantity (times price) of economic output. For markets to function well, the two should move in the same direction, not necessarily over all short-term periods, but definitely over the medium and long term. GDP counts what is produced and paid for, while the customer satisfaction index captures how well that output serves its purpose for the user.

Declining or stagnant customer satisfaction while seller profit grows occurs when buyers lose power relative to sellers. In competitive markets, sellers are supposed to make profits by satisfying their customers – not at the expense of their customers. That would be the opposite of the perfect competitive market equilibrium in classical economics, where buyers maximize utility and sellers maximize profit.

Because ACSI weakened in the first quarter of 2025, the demand curve should have shifted downward and consumer spending, which represents about 70% of GDP, should have declined. However, when there is strong seller pricing power, the reverse may happen if households have the means to spend. The ACSI forecast, which controls for changes in household income, correctly predicted an increase in consumer spending in the second quarter, despite lower customer satisfaction in Q1. Both consumer spending and GDP increased in Q2, thereby avoiding a recession.

As for predicting the third quarter, Q2’s weakening customer satisfaction might continue to be compensated for by the increase in household income. “Based on historical data, the model predicts a consumer spending increase of 2.8% for the third quarter of 2025,” said Claes Fornell, Distinguished Donald C. Cook Professor (Emeritus) of Business Administration at the University of Michigan. “While that may be an overestimate given recent events, this forecast, if correct, indicates the misalignment between buyer utility and seller profit will continue, with the risk that longer-term profitability and economic growth will suffer.”

With the possible exception of monopolistic markets, extracting more from your customers while delivering less is not a recipe for long-term success. Excess pricing power and constrained markets typically lead to less innovation, lower productivity, and smaller consumer surplus. Long-term economic health requires well-functioning markets, low consumer switching cost, and less business pricing power. Strong competition is a critical ingredient leading to high levels of innovation, productivity, and efficient allocation of resources.

At the micro level, customer satisfaction is essential for any successful business. It bolsters customer retention, stabilizes cash flow, reduces risk, and strengthens long-term earnings growth, but only in a strong competitive market. As of now, that is not the direction the economy is heading.

Claes Fornell is the Donald C. Cook Distinguished Professor of Business Administration (Emeritus) at the Ross School of Business, University of Michigan.

For more, follow the American Customer Satisfaction Index on LinkedIn and X at @theACSI or visit www.theacsi.org.

No advertising or other promotional use can be made of the data and information in this release without the express prior written consent of ACSI LLC.

About the ACSI

The American Customer Satisfaction Index (ACSI^®) has been a national economic indicator for over 25 years. It measures and analyzes customer satisfaction with about 400 companies in about 40 industries and 10 economic sectors, including various services of federal and local government agencies. Reported on a scale of 0 to 100, scores are based on data from interviews with roughly 200,000 responses annually. For more information, visit www.theacsi.org.

ACSI and its logo are Registered Marks of American Customer Satisfaction Index LLC.

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As of the second quarter of 2025, the national ACSI score is down 0.1% to 76.9 (on a scale of 0 to 100), which is roughly the same level it was 12 years ago. Its trajectory back then pointed to a much higher level, albeit not without some volatility.