For customers today, money satisfies just so much

March 02, 2011

Sharper prices lift customer satisfaction at Whole Foods, placing the chain second behind Publix. Walmart still trails.

Whole Foods Market has long been an exception in the supermarket channel. With the release of the latest American Customer Satisfaction Index (ACSI), it is once again.  While the measure for shopper satisfaction with supermarkets fell for the first time in three years (from 76 to 75), the upscale leader posted the highest percentage gain of all measured food chains, up 3.9% in 2010 on a rise from 76 to 79.

This represents a significant turnabout. As recently as 2007, Whole Foods sat near the bottom of list at 73; though product quality was perceived to be high, so were its prices.  

“Lately, the company has been more alert to consumer price sensitivity, expanding its lower-priced store brands, reducing prices on meat and produce, and offering bigger and more frequent price promotions,” says Claes Fornell, The Donald C. Cook Professor of Business Administration, at the Stephen M. Ross School of Business, University of Michigan, which founded the national index. “Whole Foods’ ACSI gain since 2007 is 8%, more than any other grocery retailer. Its share price followed suit with a jump of 84% during the past year.”

Despite such strides, Whole Foods is second behind the perennial pacesetter Publix, which has led the channel every year since 1994. Publix still leads handily, despite a 2.3% drop from 86 in 2009 to 84 in 2010.  Kroger is in third position, unchanged at 78.  Winn-Dixie rose 2.7% to 76, still above the supermarket channel average of 75, which itself slipped 1.3% from 76.

Among chains that trailed the average: Safeway, up 2.8% to 74; Supervalu, down 3.9% to 74; and Walmart, unchanged at 71, the Index shows.  “While supermarket chains like Publix thrive on the strength of their customer service, Walmart continues to be a place where people shop because of price.  Service has a strong impact on customer satisfaction, but low prices coupled with low quality do not,” adds Fornell.