Service is King

Author: (USA) John Scherzinger, translated by Chen Ying
Translator: Chen Ying / Country:
Publisher:
Publish Date: 2004-08-01
Features: Home Depot, the second-largest retailer in the U.S. and a chain of home improvement stores, is one of the global paragons of quality service. Home Depot was founded by Bernie Marcus and Arthur Blank in 1979, starting with just three stores in Atlanta, Georgia. The company's sales in 2003 reached $65 billion, with profits of $4.3 billion. In 2003, the company operated 1,700 stores and employed 360,000 partners. Marcus said, "Cultivating customers is like growing soybeans. Prepare the land, maybe add some fertilizer. Plant the seeds, prune and fertilize, spray pesticides. If you manage it well, it will always grow bigger and bear more fruit." Robert Nardelli, elected as CEO and President of Home Depot in 2001, had previously missed out on the CEO position at General Electric. Marcus and Blank, the founders of Home Depot, quickly took action, hiring Nardelli and appointing him as CEO. Nardelli said, "The biggest threat to success is complacency. Our biggest competitor isn't Lowe's (the second-largest home improvement retailer in the U.S.), but ourselves." Arthur Blank said, "We're in the business of people, not just transactions." Few retailers understand this idea. Blank and Marcus said, "These principles help people reach their best. No one likes a company. A company is just a logo. No one likes bricks and mortar." According to the company's tradition, they hire the best in the industry each year, allowing them to outperform competitors and create more profits. This builds their initial loyalty to the company from the start; accepting company stock strengthens this loyalty; they appreciate how the company treats them. When buying Home Depot stock, all partners can purchase shares at 85% of the market price with no risk. Since its IPO in 1981, the company's stock has grown by an average of 48% annually. The founders believed it was crucial for the company to develop not just rational relationships with customers and partners, but also a strong emotional connection. Business is ultimately about people, and people need to connect with each other. When Arthur Blank was CEO, he spent 25% of his time visiting stores. Home Depot's board members are required to visit 12 stores each quarter. The four key elements of Home Depot's success are:
1. Customers are king. Everything is done according to customer requirements to ensure their next visit.
2. Don't just look at the balance sheet. The only way for managers to truly understand what's happening in the store is to go there and see how customers are behaving.
3. Be cautious. Always be ready to change plans to meet new demands. Don't become complacent after completing a task, because the market is always evolving.
4. Be an entrepreneur. Every employee should be empowered to do what's right in specific situations, not just follow company rules. This might cause chaos for suppliers but can retain customers.
To learn more about this global leader in quality service, visit their website (www.HOMEDEPOT.com) or read Marcus and Blank's book, "Home Depot from Zero." Buy some of their stock to see their annual reports (and make some money while doing so). I recently returned two items to Home Depot. One was too small, and the other's receipt was lost. Home Depot refunded both items to my credit card without asking any questions. When I tried to pay 53 cents with my credit card, the cashier, Beth, said that payments under $1 couldn't be made with credit cards. I didn't have cash or a checkbook on me. Beth said, "Don't hurry. I have 53 cents." How many of your employees would go the extra mile like that? After leaving the store, I called the store manager to commend Beth on her service. With this kind of service, why would I shop anywhere else? Home Depot has excellent service, years ahead of other home improvement stores. Its employees are service-oriented, and Home Depot has built its own service culture. Year after year, its employees have excelled in service. The company has 1,332 stores and 250,000 employees. Home Depot estimates a 10% sales growth and a 12% profit increase in its 2004 fiscal year. Quality service indeed contributes to increased revenue. One example is order upgrading. For instance, a customer calls to order goods worth ￡3,000, and the employee says, "If you order ￡5,000 worth of goods, you'll get a 10% discount." The customer says, "Okay." This is order upgrading—a clear example of how excellent customer service can expand transactions and increase revenue. Does revenue change directly with customer satisfaction? We believe it does. When you do something for a customer, even something as simple as a refund or discount, the goodwill you generate will bring you far more revenue in the future than the cost of the service itself. That's true. Promoting customer service awareness To strengthen employees' customer service awareness, a leading company regularly swaps staff with front-line employees. The theory behind this is that front-line employees have direct customer contact and are often more customer-focused. Sending staff to the front lines improves their customer awareness and, in turn, that of their colleagues, thereby raising service awareness across the company. Other companies regularly conduct refresher training on customer service, post reminders to provide quality service, keep the reminders fresh, promote the value of service to employees and the company in internal communications and newspapers, and reward high-performing employees. It's crucial for the entire company to be involved in service, because customers treat the company as a whole. They don't accept excuses like, "Oh, he's just a staff member. He doesn't know what the customer wants." If one department makes a mistake or lacks customer awareness, it can affect the customer's perception of the entire company. Refresher training should be conducted every six months. Without large-scale, company-wide training or refresher sessions, the result could be poor service—unless it's followed by training for one or two months. Managers might reflect, "I guess customer service training wasn't very successful." In reality, any training must be continuously reinforced. Employees must be reminded that no training is a one-time fix. Another mistake in employee training is simply repeating the same training. When training becomes repetitive, employees get bored and can't focus. Large companies, like Sprint, AOL, and Dell's ad agencies, change their ads monthly—or even weekly. They spend millions on ad production. These companies' agencies and ad executives say, "We know you can create the perfect ad for the next five years." If we ran the same ad every month for five years, we could save on ad production costs." But that never happens, because no ad is perfect, its impact is limited, and updating ads is crucial to capturing viewers' attention. The millions spent on outdated ads are wasted. Fundamentally, this is how most companies approach training programs. Labor time is like ad quality. If the message doesn't work, your money is wasted. Include enough new cases, names, and ideas in training to keep employees engaged. SQI's training arsenal has enough tools to train employees every six months for several years, helping them achieve quality service goals without repetitive training that makes them bored. When choosing the most effective solutions and projects for your business, refer to methods that have proven successful for most companies. Here are the common characteristics of successful service programs. The order in which they are listed does not reflect their effectiveness.
Customer-friendly service systems Customer-friendly systems are designed primarily to make life easier for customers, not just for the company. This contrasts sharply with the common practice of prioritizing employees' convenience, cost advantages, and company "policies" over customers' interests. "We used to look for ways to make our jobs simpler," said Chris Cox, then head of service improvement for the New Jersey division of automotive services. "Now, when we redesign our work, we focus as much as possible on customer convenience." When suggesting ways to improve service systems, Cox said, "If you want to make real, lasting changes for customers, you must make real, lasting changes to your company's structure." It must be made clear to employees that friendliness and enthusiasm are not just encouraged but expected. Following the guidance of Mike Worsfold, managing director of Partnering Designs (a Toronto-based management consulting firm), he said, "You don't just smile because the sun is shining or you had a good breakfast. You smile because it's your job." However, some employees never smile. They are victims of the "You Need Syndrome." Bob Hynes, former sales manager and store development manager at TruServ, who oversaw training, said that hardware store salespeople "play the role of senior consultants very minimally." They use household chores as an excuse. He said, "They talk endlessly to customers while sweeping or restocking shelves." Here are the key elements of a friendly customer system: fast service, informative signage, convenient layout, in-stock products, rolling carts that are actually useful, and employees who know what they're doing. A friendly customer interface also means sincerity, good communication, and the golden rule. However, for some companies, consistently high-quality products are the most important feature of friendly customer service. This is a very wise stance.