Customer Service Reader

The living brand

Excerpts from Creating the Living Brand 
Neeli Bendapudi and Venkat Bendapudi, in Harvard Business Review

Any company can deliver outstanding customer service - even convenience stores, where low pay and high turnover supposedly make service a problem.

• Even companies that position themselves for the mass market can provide outstanding customer–employee interactions and profit from them. Their secret? They consider employees their living brand and devote a great deal of time and energy to hiring and developing them so that they reflect the brand’s core values
• We studied the convenience store industry in depth for two years, in conjunction with the National Association of Convenience Stores, and conducted detailed case studies of two companies: QuikTrip (QT), a $4 billion privately held firm based in Tulsa, Oklahoma, that operates 462 stores in nine central, western, and southern states, and the $2.8 billion Wawa, a privately held company based in Wawa, Pennsylvania, that operates more than 500 stores in five eastern states. QT has been listed as one of Fortune’s 100 best places to work three years in a row; in 2005 it was ranked number 19. Turnover rates at QT and Wawa are 14% and 22% respectively, a small fraction of the triple-digit average turnover in the retail sector.
• Both companies routinely outperform the market. From 1977 through 2003, Wawa stock has grown at an average annual compounded rate of 17%, nearly twice that of the S&P 500. QT’s stock value has risen 19.2% in the past three-year period, more than four times the S&P’s rate.
• We uncovered six principles that both companies embrace to instill the brand and its meaning in their employees - and to create a strong culture of customer service. Both Wawa and QT demonstrate the power, even in minimum-wage businesses, of investment in employees to create a positive customer experience.

Six Lessons of the Living Brand

1. Know what you’re looking for

• Every organization must have a clear vision of the skills and characteristics it wants in its workforce, and have a plan for getting them. But few companies that hire in the mass market have the discipline to go about doing that rationally and systematically.
• A company must decide which skills and qualities can be taught and which must be hired. QT insists on hiring “nice” people who like people, because that’s a tough quality to teach; it’s either present or not. At Wawa, the must-have is passion, for work and life.
• QT puts applicants through a rigorous, structured process that includes a personality assessment based on the qualities of QT’s most successful performers. Interviewers probe for stories to complete the picture.
• Hiring decisions at QT aren’t left to store managers. Instead, managers in each of the company’s eight geographic divisions do all the recruiting and hiring for their regions.

2. Make the most of talent

• In mass-market retail environments, talent is generally viewed as a commodity, and employees are basically interchangeable. But that outlook becomes a self-fulfilling prophesy. Studies have repeatedly shown that people rise or stoop to the expectations set for them.
• Wawa and QT get more from their people because they expect more. One way they communicate expectations is through training. At QT, each new full-time employee is partnered with a personal trainer who has previously held the same position.
  
• Such investment in people continues well beyond the initial hire. Wawa encourages its people to pursue degrees in any field of study, and reimburses tuition at three colleges with which it has relationships. The emphasis on learning helps Wawa to be an employer of choice, even though its pay is on a par with other companies in its labor market.
• People perform at their best if they see a future for themselves at a company. Employees know they can have a career at QT, due to its strong culture of promoting from within.
  
• These companies ensure that employees have the support they need, both externally and internally, to do their jobs well. Wawa involves store managers, who have the best information on store operations, in improving the performance of vendors. The company takes the same hard-nosed approach to analyzing the quality of internal support processes such as marketing and human resources.

3. Create pride in the brand

• In retail, service is the manifestation of the brand, and service quality depends directly on employees’ attachment to the brand. QT and Wawa constantly and consciously invest in maintaining brands that employees can take pride in.
• Such is the attachment to Wawa brands that the company’s 1994 move to put Taco Bell and Pizza Hut outlets in more than 100 stores was met with opposition from customers and employees alike. In 1996, Wawa began to phase out the brands to make more room for Wawa products. The company openly discussed with associates the error of the earlier decision and acknowledged the value of employee input.

4. Build community

• While many convenience store chains have focused on speed of transactions and sales volume per store, Wawa and QT have made concerted efforts to build customer loyalty through a sense of community. Almost all the customers we interviewed mentioned employee friendliness as one of the reasons they come back to the stores.
  
• At both stores, customers remarked upon two things they believed were unique: The people who worked at the stores seemed to be glad to be there, and they seemed to like one another. The perceived sense of community among store associates appears to spill over into a sense of community with customers.
• At QT, the community feeling extends to the customer-service appraisal system and the reward structure. The emphasis is on the team’s performance in satisfying and delighting customers. If a mystery shopper is especially impressed with a particular employee, everyone on staff at the store during that shift receives a bonus.

5. Share the business context

• Employees need a clear understanding of how their company operates - particularly, how it defines success. Because they understand the company’s values, employees don’t have to follow a rigid set of rules - they just have to behave in ways that meet customer needs.
• Employees also need to know how their work affects companywide financial performance and how the company arrives at its targets. Armed with this information, workers can better understand the decisions of upper management and improve job performance. At QT, every full-time associate is trained to read the store’s monthly financial statements and earns a bonus that is based on the store’s operating profit.
• QT executives are quick to dissect their mistakes. One of the purposes of this policy of openness is to encourage innovation by conveying the company’s tolerance for well-meant mistakes. Chet Cadieux, the CEO, tells employees that as long as the company hires smart and caring people, no employee can make an error that the company cannot recover from.
• Wawa coffee, which has a devoted following, was introduced because a lone employee decided to offer brewed coffee in a store.

6. Satisfy the soul

• Researchers suggest that to truly harness an individual’s creativity, to get her full passion and engagement, a company must meet her needs for security, esteem, and justice.
• Security. QT’s employees know that their safety and well-being are of paramount importance to top management, which deploys technology and staffing models to create a sense of security.
  
• Esteem. The emotional and physical demands of a service job can be wearing, so Wawa provides rejuvenation by celebrating successes and milestones. Every month, mystery shoppers evaluate Wawa stores along the company’s brand standards, which detail expectations for every element of the store experience, from waiting time to the freshness of the food to the cleanliness of the restrooms. Highscoring teams are visited by the “prize patrol,” which brings rewards and a party.
• Justice. So that workers will feel they are being treated fairly, Wawa gives eligible employees a share in about 10% of the company’s base profits. It has expanded its employee stock-ownership plan and is offering associates an opportunity to purchase additional shares. A mark of employee confidence in the company: Some 29% of company shares are held by associates.

At first glance, the investments that Wawa and QT make in their living brands may seem excessive. Executives are quick to agree that both organizations spend more than their competitors, though as private companies they keep the numbers close to the vest. “How can they afford to do that?” is a question we have heard as we have shared these stories of uncommon service quality in a commonplace industry. The leaders of Wawa and QT reply: “How can you afford not to?”

The Golden Mean

Who love too much, hate in the like extreme,
And both the golden mean alike condemn.
- Alexander Pope, in The Odyssey of Homer

Although I am a customer service radical, I do not believe in such platitudes as the “customer is always right”. The customer can be wrong, or worse, insane. So I do not believe that you should always give them what they want. A revolution based on such unrealistic claptrap sows the seeds of its own destruction. You will not be able to stay in business if you give away the store.

Many companies that are renowned for customer service - such as Disney, Nordstrom, and Ritz-Carlton - can afford to do almost anything to appease their customers, even when they’re wrong. That’s because their margins are so high. You cannot afford to be so liberal when you’re competing in a low-margin industry.

And a lot also depends on the cost of the accommodation. It’s easy enough to give away a free day pass, or a free pair of shoes, or a free night’s stay. Not so easy to give a plasma TV away.

Too often I have seen companies swing from one extreme to the other. For example, they’ll start with a liberal “Satisfaction Guaranteed” return policy. They eventually notice that returns are hurting their sales, and that mountains of rejects are piling up on their floors. They panic and swing the other way. No returns past 14 days. 15% restock on open-box product. Eventually they notice that their customers abandoned them for the store next door, and that their employee turnover went through the roof because people just couldn’t take getting screamed at anymore. And back they swing again.

The right thing to do is, of course, somewhere in the middle. If you’re a low-margin business, you must have policies that are competitive – not much better or worse than your competition. Then you must give your people the power and the training to bend the rules. Here’s the principle: The policies are there to protect the company from bad customers. Your people are there to protect good customers from the policies.

Such a balanced approach requires that you hire people with experience and judgment. If you can’t afford to hire such people into front-line positions, you must define specific guidelines within which your people can play. If you think that hiring the right people and training them is just too much trouble and expense, enjoy the swing.

Service ethics

Excerpts from Service ethics
Charles Watson & Pamela Johnson, in Executive Excellence

• Genuine satisfaction is achieved when one lives for something outside of oneself instead of doing what one merely enjoys, or doing things that might produce recognition and praise or a sense of self-confidence, or affection and companionship.
• Behaving only to fulfill self-centered needs truncates what a human is capable of experiencing and achieving.
• Those who make lasting contributions, as history reveals, are not the ones who seek happiness for themselves. A sense of fulfillment comes unexpectedly, through sacrifices in the service of others or in some great cause.
• A careful analysis of the happiest people shows that they have succeeded in forgetting themselves while they were all-consumed in the service of something truly worthwhile.
• The good life is achieved not by obtaining valuables for oneself but by serving others in valuable ways.
• By serving others, not ourselves, we derive lasting satisfaction.
• Working to serve others or a great cause not only produces remarkable business results, it also changes dramatically those who chose to do so.
• We can better understand why service leads to a better world and to a better life by realizing that selfless service demands a radical departure from customary attitudes, orientations, and habit patterns. It requires boldness to put oneself second to something greater first. It requires vigilance to monitor one's feelings and actions to maintain these priorities.
• Service calls the individual to subordinate himself as the central focus of life, to make whatever sacrifices are necessary to shoulder his responsibilities and carry the burdens demanded by his cause, and to realize that he steadily builds his own character.
• One indication of whether a person has forgotten himself in the pursuit of a cause is whether he views his work as a privilege, or as a form of drudgery. Those who are concerned mostly with serving and who forget themselves in the process, view their work as a privilege, and in so doing are equipped with the right attitude and mental stamina to bear the difficulties and hardships the work involves.
• Every great endeavor requires great sacrifices; nothing of significance is produced through insignificant efforts.
• Life takes on real meaning when one does meaningful things. Then no demand is too great, no work too dirty, no job unimportant.
• We owe everything to those people who spend their lives without fear, hesitation, or expectation of personal gain and comfort, working for great causes. Only through service do people achieve greatness.
• The great difficulty for anyone is to make himself into the kind of person who gives up what he thinks he owns, to become someone who boldly spends his life in the service of worthwhile ends.

War on customers

Excerpts from Stop The War on Customers
Fred Reichheld

Company leaders realize that profitable growth is impossible without loyalty — yet they have failed miserably in their efforts to earn loyalty from either their customers or their front-line employees. After pondering this paradox for several years I finally began to realize the answer.

The first step is to set aside all that rosy rhetoric about customer focus. Most companies today are waging a war they cannot win — the war against their customers. They cut corners on product and service quality. They impose hidden fees and charges. They force customers to endure aggressive sales tactics, endless airport lines, and virtual or voicemail hell. They don’t tell the truth in their advertising and marketing, nor do they own up to their mistakes.

Ironically, this is a war most of the generals do not want to fight. CEOs spend countless millions of dollars on customer-focus initiatives, improved service quality, and enhanced customer experiences. They extol customer loyalty as the ultimate strategic advantage. Satisfaction surveys rain down on homes and businesses with implicit messages of care, concern, and promises of a better future.

Yet this undeclared war is escalating. Cellular phone providers trap customers in long-term contracts, and then abuse them with outrageous overage charges. Car dealers mislead and manipulate consumers. Banks charge unconscionable nuisance fees. Electronics store clerks flog extended warranties more desperately than their flat-screen TVs. Printer manufacturers price-gouge on refill cartridges. Computer companies make sure that calling their customer help-line is more painful than a trip to the dentist.

Yes, what is really going on is an undeclared war that is destroying corporate reputations, alienating employees, and decimating economic prosperity. It is the reason that nearly 80% of the world’s major corporations failed to achieve a modest 5% real, sustainable rate of growth over the past decade. This war is the reason why society has concluded that business ethics and good profits are both oxymoronic.

The reason I wrote The Ultimate Question was to expose this war and its full range of guerrilla activities. I hoped that I could provide a manual of the tools and tactics required to stop this war for good—and clarify how corporate leaders are unwittingly motivating their troops to book bad profits that destroy loyalty and growth. My goal is to help leaders revitalize good profits and true growth by showing them a practical path for holding organization members accountable for building good relationships and for standards of behavior that are consistent with the Golden Rule and respectful of human dignity (of customers, employees, suppliers and investors alike). We must all blow the whistle on bad profits.

See also:
Reichheld on "The Ultimate Question"
Reichheld on Loyalty
A Survey of Surveys

Service is decisive

A survey conducted by Harris Interactive found that customer service is the deciding factor when it comes to shoppers increasing or decreasing their shopping budget. Other findings:

• 85% said they were somewhat to very likely to purchase additional products if they had interaction with a knowledgeable sales associate
• 82% will only wait for less than 15 minutes
• 45% shop for themselves during the holiday season
• If shopping conditions are not optimal, consumers will return goods to the shelf

The survey was sponsored by Kronos Incorporated

and it stops stealing

In his Times-Dispatch column, Stu Neal, Director of the Center for Entrepreneurial Development, points out an important offshoot of customer service that is often overlooked: it deters theft.

Mr Neal notes that there are two groups of thieves: professionals and amateurs. Quoting verbatim (with permission):

Professionals. They steal products, usually expensive and high-end items, that can be quickly sold. They usually have a ready-made market for what they steal. They may even be stealing items to fulfill a "shopping list" provided to them by those who fence the products.

These pros are good, using custom-designed clothing, bags, even custom-designed baby carriages or strollers to steal.

What professional shoplifters don't want is to be noticed - they want to blend into the background. Great customer service means greeting the customer to elicit a response, making eye contact, being close at hand, and many times being overly helpful. Exactly what the pros don't want. Having been noticed (and now identifiable), they are likely to go elsewhere, where the pickings will be easier.

Amateurs. For amateurs, shoplifting is usually a crime of convenience, more than a way to produce an ongoing revenue stream. These customers might see an item and have a question on price, quality, etc. There is no one around, and when they can't get help within a reasonable amount of time, they simply lift the product. They figure that if they are not noticed by that point, they won't be noticed stealing.

Once again, great customer service is the easy fix. If someone acknowledges them, or they know someone will be with them shortly, it is simply not convenient to steal.

Read more: Great customer service is best shoplifting deterrent

What is Loyalty?

Excerpts from The One Number You Need to Grow
Frederick F Reichheld in Harvard Business Review

• Loyalty is the willingness of someone--a customer, an employee, a friend--to make an investment or personal sacrifice in order to strengthen a relationship. For a customer, that can mean sticking with a supplier who treats him well and gives him good value in the long term even if the supplier does not offer the best price in a particular transaction.
• Customer loyalty is about much more than repeat purchases. Someone who buys again and again from the same company may not necessarily be loyal to that company but instead may be trapped by inertia, indifference, or exit barriers erected by the company or circumstance. On the other hand, a customer may be loyal even when she doesn't make frequent purchases. For example, she may have moved out of town but still recommends a store to her friends back home.
• True loyalty clearly affects profitability. While regular customers aren't always profitable, their choice to stick with a product or service typically reduces a company's customer acquisition costs. Loyalty also drives top-line growth.
• No company can grow if its customer bucket is leaky, and loyalty helps eliminate this outflow. Loyal customers can raise the water level in the bucket: Customers who are truly loyal tend to buy more over time, as their incomes grow or they devote a larger share of their wallets to a company they feel good about.
• Loyal customers talk up a company to their friends, family, and colleagues. Such a recommendation is one of the best indicators of loyalty. When customers act as references, they do more than indicate that they've received good economic value from a company; they put their own reputations on the line. And they will risk their reputations only if they feel intense loyalty.
• The tendency of loyal customers to bring in new customers--at no charge to the company--is particularly beneficial as a company grows, especially if it operates in a mature industry. In such a case, the tremendous marketing costs of acquiring each new customer through advertising and other promotions make it hard to grow profitably. In fact, the only path to profitable growth may lie in a company's ability to get its loyal customers to become, in effect, its marketing department.

See also:
Reichheld on the war on customers
Reichheld on "The Ultimate Question"
A Survey of Surveys

Goodman on complaints

Notes from Basic Facts on Customer Complaint Behavior
John Goodman

• 50% of consumers will complain about a problem to a front line person. If this person is an employee of a distributor or retailer, the chances are high that the problem will never be reported to the manufacturer or corporate office.
• Only 1-5% of customers will escalate their complaint to a local manager or corporate HQ. For packaged goods and other small ticket items, TARP has found that 96% of consumers either do not complain or complain only to the retailer from whom the product was bought.
• For large ticket items, the complaint rate is higher. 50% will complain to the front line, and 5-10% of complainers will escalate to local management or to corporate.
• The existence of an 800 number at corporate HQ will, on average, double the number of complaints getting to corporate. However, only one out of 100-500 will actually be addressed to a senior executive.
• Complaint rates vary by type of problem. Problems which result in out of pocket monetary loss have high complaint rates (e.g., 50-75%) while mistreatment, quality, and incompetence problems evoke only 5-30% complaint rates to the front line.
• On average, twice as many people are told about a bad experience than are told about a good experience. The magnitude of word of mouth varies by product, price, and industry. For example, the ratio was 10:5 for a soft drinks maker, and 16:8 for a car manufacturer.
• Depending on whether the problem is minor or major, 54-70% of customers will buy from you again if you resolve the problem. This rises to 82-95% if you resolve the problem quickly.
• Customers who complain and are satisfied are up to 8% more loyal than if they had no problem at all.
• It is five times more expensive to win a new customer as it is to keep a current customer. The range varies from 2:1 to 20:1.

Kamin on benefits to business

Notes from Customer Service Training
Maxine Kamin

• As John Naisbitt predicted in Megatrends, the more high-tech we get, the more high touch we'll need. People need the personal, human touch in business dealings. They need human contact that is compassionate and kind, helpful and genuine. There is no substitute for caring.
• In customer service, that means caring about the whole customer experience. It includes ensuring that deliveries are on time, providing relevant information, solving problems that arise, and following up as needed.
• Service is important to customers, and it is equally important for business growth. It is an essential — not a luxury to be practiced when there is time.

Consider the following research findings compiled on the basis of responses from more than 5,700 customers, employees, and managers:

• Customers are five times more likely to switch vendors because of perceived service problems than for price concerns or product quality issues.
• The highest employee turnover rates are associated with those companies possessing the lowest service quality.
• The bottom line in customer service is that customers want to feel cared about and respected, and that they are more likely to return if these conditions are met.
• If customers' problems are resolved in a satisfactory manner, they are more likely to return to a business or organization, and to be more loyal.
• If satisfied with service, an average customer's lifetime with an organization lasts approximately 10 years.
• Businesses that provide superior customer service can charge more, realize greater profits, and increase their market share by an average of 6 percent per year.
• Some customers are dissatisfied with their purchases or services and never complain, but they never return to that business.
• Those who do complain and don't get results are not likely to return either, although the organization may never know about it.
• Those who are treated with concern and respect become even more loyal, and inevitably recommend that business to others.
• It costs up to five or six times more to attract new customers than to keep loyal ones. This ratio can range from 2:1 to 20:1, depending on industry.
• A dissatisfied customer will tell approximately 10 people about his or her experience. Approximately 13 percent of those individuals will tell up to 20 more people.
• Satisfied customers will tell between three and five people about a positive experience.
• 70% of dissatisfied customers who do not get their complaint resolved to their satisfaction will not continue doing business with that organization.