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Best and Worst Industries for Service

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Just as some actors may have trouble going to sleep the night before the Academy Award nominees are announced, some industries may also reach for a glass of warm milk the night before the folks at The Harris Poll release the results of their latest survey of public opinion on industry reputations for customer service.

Well, the envelope has been opened, with good news for some industries and bad news for others. This is useful information for us investors, because companies with poor customer service may end up struggling.

Here are some highlights of the survey, along with my thoughts:

  • The folks at Kroger (NYSE: KR  ) should be smiling, as top honors go to supermarkets, with 90% of respondents giving a thumbs-up. Unfortunately, this isn't the most exciting and profitable industry for investors, and it's known for having very thin profit margins. (Still, Kroger has eked out market-beating returns in recent years.) Another challenge for the industry is the increasing presence of Wal-Mart (NYSE: WMT  ) as a grocery vendor.
  • Who else is celebrating? With the next two top industries being online search engines and computer hardware, Google (Nasdaq: GOOG  ) and Dell (Nasdaq: DELL  ) can claim their place on the podium. Rounding out the top five are software companies such as Adobe (Nasdaq: ADBE  ) and hospitals like Tenet Healthcare (NYSE: THC  ) . Internet service providers finished sixth. So many people often complain about their computers' glitches, their online connections, and the difficulty in getting their technical problems resolved. So it's surprsing that most people appear to be rather satisfied in these departments.
  • So who's at the bottom of the list? Well, you may not be shocked to hear that the bottom of the barrel includes tobacco companies, oil companies, and health-care insurers and companies. I suspect that our current economic environment has something to do with this. As the price of cigarettes, for example, has risen, smokers are increasingly likely to resent their habit and the money it's taking from them. Oil companies and health-care outfits are also seen as pricing things too high and profiting on the backs of consumers. Airlines, cable companies, and drug companies round out the bottom; again, because the cost of their offerings offends some consumers' sensibilities.

The silver lining
So if you're invested in some bottom-ranking companies, should you quickly sell your shares? Not necessarily, and perhaps not at all. There's actually a good angle to being a low-ranking company. It means you have lots of room for improvement, and improvement can bring a heftier valuation and profits for shareholders.

Of course, it doesn't always work that way. Sometimes, consumers' poor perception of a company can be hard to change -- just look at General Motors (NYSE: GM  ) and its attempts to recover from questions about vehicle quality.

Being in the doghouse can also hurt a company by consuming some of its energy. Wal-Mart, for example, has to continually rebut detractors. Cable providers like Comcast also receive plenty of criticism regularly. Thus, companies with generally positive reputations should try to hang on to them for as long as possible.

The bottom line is that it's useful to consider a company's service reputation when you consider investing in it. If it's poor, customers aren't likely to keep coming back.

Looking for undervalued companies that stand a good chance of turning themselves around? Test-drive, for free, our Motley Fool Inside Value newsletter, which seeks out bargains, often among companies and industries that others have forgotten about.

Longtime Fool contributor Selena Maranjian owns shares of Wal-Mart. Wal-Mart and Dell are Motley Fool Inside Value picks. Google is a Motley Fool Rule Breakers recommendation. Try our investing newsletters free for 30 days. The Motley Fool is Fools writing for Fools.


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Selena Maranjian
TMFSelena

Selena Maranjian has been writing for the Fool since 1996 and covers basic investing and personal finance topics. She also prepares the Fool's syndicated newspaper column and has written or co-written a number of Fool books. For more financial and non-financial fare (as well as silly things), follow her on Twitter...

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