Consuming Issues: Competition means friendlier faces at the tills

One of the good things about getting old – though I won't be getting a free bus pass for decades – is that you can compare how things used to be and how they are now, and one of the most pleasing developments has been a revolution in customer service.

Twenty years ago, you often got a blank look when asking where to find the honey/chainsaws/nappies, or whether something came with a guarantee or batteries.

You still encounter that sometimes, but are more likely to be walked to the honey/chainsaw/nappy department and be greeted by an unfeasibly cheery or at least a passably friendly face at the till.

Regular surveys by the Institute of Customer Service (ICS) back up this anecdotal view. Over the past three years its average customer satisfaction score has risen from 65 per cent in July 2007 to 75 per cent in July 2010. Its latest six-monthly survey, based on an internet poll of 26,000 shoppers, unsurprisingly reveals that some organisations and sectors do better than others.

First, the firms that treat customers well. Of 153 organisations, the public rated the top 10 as: John Lewis, Waitrose, Lloyds Pharmacy, Saga Holidays, Virgin Holidays, Marriott, Marks & Spencer Food, Boots, First Direct, and Marks & Spencer stores.

Why did these firms do so well? It's interesting that the top two, John Lewis and Waitrose, belong to the same employee-owned business, the John Lewis Partnership, which offers better pay and conditions than high-street rivals. Almost certainly because of these benefits, fewer employees quit and those who remain become more experienced and knowledgeable.

Some of the other retailers which are not employee-owned have a social ethos. While being a shareholder-owned firm, Marks & Spencer has an interest in ethical trading and a reputation for nurturing staff. Lloyds Pharmacies, owned by a German pharmacy giant, has a long list of employee benefits, including an annual bonus and a 20 per cent discount for staff.

Boots, part-owned by the venture capital firm Kohlberg Kravis Roberts, now rewards staff on customer service rather than sales, and polls 50,000 shoppers on its performance every week.

Jo Causon, ICS chief executive, says: "There's clearly a link between customer satisfaction and employee engagement. We know – without being trite about it – that happier staff create happier customers."

This was how sectors performed, with the best first: food shops, services, shops, tourism, motor industry, insurance, leisure, banking, transport (bear with me, you're about to get to the worst), telecommunications, local public services, national public services and utilities. Now there's a trend here: the greater the competition in a market, the better the service.

We can't change our water company, and few switch power supplier. Result: poor service (though utilities were the most improved in the first six months of 2010). Similarly, we mostly don't have a choice of hospital, school or council. We tend not to change landline or mobile phone provider and stick with the same bank. Result: poor service.

Whereas, if we don't like our supermarket, chemist or hairdresser, we saunter off to the next one. Companies in competitive industries know they must keep customers happy.

It's important to point out some public services did well, such as the ambulance service, perhaps the most important one to get right. But the overall message is: contented staff in active markets make customers smile.

m.hickman@independent.co.uk

Heroes and villains

This smart box will revolutionise your TV viewing

Hero: Humax

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Villain: Santander

It's back to the naughty step for Santander, which has gobbled up Abbey, Bradford & Bingley and Alliance & Leicester. Most of its 53 savings and cash ISA accounts pay less than 0.5 per cent interest, which means that with a Consumer Price Index at 3 per cent, you will lose rather than gain if you "save" with them.