[Sponsored Report] NCSI proves itself as a leading economic index

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[Sponsored Report] NCSI proves itself as a leading economic index

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The National Customer Satisfaction Index, or the NCSI, is an index of customer satisfaction level compiled by surveying customers about products and services produced inside and outside of Korea and sold to local customers who have actually used them.

The NCSI model includes level of expectations, quality, recognition value, total satisfaction, complaint rate, customer royalty rate and customer maintenance rate.

The NCSI shows close correlation with economic indexes such as the stock index, unemployment rate and GDP.

The measurement model is very high in creditability compared to other customer satisfaction measurement models since it analyzes the cause and effect of model components.

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In addition, the index can expect and predict a company’s financial results according to changes in customer satisfaction due to quality improvement or changes in client behavior (telling others, recommending and suggesting the product to others, complaining, and loyalty).

Furthermore, the NCSI is a useful index in analyzing the reality of the Korean economy.

GDP, which is the main index to check the status of a nation’s economy, can measure consumers’ consumption experiences. If consumers are satisfied with the products and services they consume, then consumption will increase along with production by companies.

A comparison of the NCSI and GDP can help to determine whether GDP growth is simply caused by an increase in productivity or others factors, including those related to consumer satisfaction. In short, the trade volume in the market changes according to fluctuation in satisfaction of customers who purchased relevant products and services. This change in trade volume later affects production and consumption, so it can be said that GDP growth is closely related to customer satisfaction.

Correlation tests including the NCSI and stock index (year-end closing price) show a correlation coefficient of 0.747 (significance level 0.01), which indicates a very strong positive correlation.

As for the comparison with unemployment rate, it showed minus 0.897 (significance level 0.01), indicating a very strong negative correlation.

The level of correlation between the NCSI and the stock index can be explained using two factors.

First, it means that the NCSI reflects the current economic situation. If the economy is not doing well, customers will feel more of a burden due to prices and companies will invest less in products and services, eventually leading to a decrease in the NCSI. By contrast, when the economy is doing well, companies will invest more, release new products and develop a wider variety of services. At the same time, customers will be less sensitive to prices of products and services, leading to an increase in the NCSI.

Secondly, the NCSI plays a role of attracting positive economic effects of companies. If customers are satisfied with the products and services produced by a company, then they will increase their consumption, leading to more profit for the company and a higher value on the stock market.

However, if customer satisfaction declines, customers have a negative impression of the companies, leading to a fall in sales and decreased stock price on the stock index.

Regarding the correlation between the NCSI and the unemployment rate, when the NCSI goes up, the unemployment rate goes down. When the NCSI index goes down, the unemployment rate goes up.

This means that if customer satisfaction improves, companies are able to hold onto more clients and the overall financial standing of companies will improve. This will in turn lead to the hiring of more employees and a diversification of business, creating even more jobs.

These results show that the NCSI is closely related to economic growth and creation of jobs. They also prove that it can be used as a leading economic index to predict changes in the stock index and unemployment rate.

Dr. Fornell, the ACSI developer, said that customer satisfaction is a leading indicator of economic results and is otherwise closely related to economic growth, job creation, productivity and GDP.

“As economic results and the NCSI are closely related, we need to help companies with good NCSI results achieve good economic results as the economic recession continues,” said Jin Hong, chairman and CEO of the Korea Productivity Center. “Companies must actively invest in customer satisfaction. We will work to improve the completeness of the NCSI so it can play its role more sufficiently as a leading economic index designed to predict changes in GDP, the stock index and the unemployment rate.”

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