Customer Service

Ale-8-One, a ginger-flavored soda, has developed a small but devoted following over the more than 80 years since its invention. Although its core distribution is confined to 25 counties in central Kentucky, Ale-8-One Bottling Company ships an average of 150 to 200 cases a month to customers around the world, including troops serving in the Middle East.

“My father said, ‘The only thing that improves Ale-8 is a shot of bourbon,’” recalls company president Frank Rogers III, 60. The family has been in the soft-drink business since 1902, when Rogers’ great-uncle G.L. Wainscott started bottling soda water, eventually adding different flavors. The company’s ginger-flavored namesake was developed in 1926. It was named Ale-8-One (or “A Late One”) because it was the latest entry in the soft-drink market.

Its name may be wordplay, but its customer loyalty is nothing to laugh at. Rogers recalls seeing a man load bottles of Ale-8 into the trunk of a car with an Alaska license plate. Some parents establish charge accounts to have the product shipped to children atending out-of-state college, Rogers adds.

The industry has changed considerably over the last century. Rogers has seen returnable bottles drop to 14% of Ale-8’s business, “but we still are in them,” he says. Many customers prefer the long-necked returnables, but keeping the old bottle-washing equipment operating has its own challenges. “We’re on the cutting edge of obsolescent technology,” says Rogers with a laugh.

Founder Wainscott’s wife, Jane, willed her interest in the company to her brother, Frank A. Rogers Sr., who purchased the remaining stock from Ale-8’s employees. The company has been in the Rogers family ever since.

“When my father [Frank Rogers Jr.] took over, he said the company had one foot in the grave and another on a banana peel, so to speak,” Frank III says. “He started with $1,400 in the bank account and three old trucks, the newest of which was a ’56 model.” That was in ’62.

Rogers has expanded the business considerably since then, but not at the expense of quality. He postponed adding a diet soda until 2003, when he finally found an acceptable sugar substitute. The company is increasing brand recognition through a joint marketing venture with Kentucky Proud, which promotes the state’s agricultural products. Selections include salsa, apple butter and hard candy made with the soda. “They are just a sideline,” Rogers says, “but they serve well to put the brand name out in a different context.”

In fact, he says, for years the Rogers family has added Ale-8 to their own recipes—“scrambled eggs or pancakes, waffles or French toast.” He notes that the soda creates a lighter, fluffier end product “if you don’t beat it too heavily.”

Rogers is in the process of turning control over to his 26-year-old son, Fielding. “I’ve put in 33 years,” Frank Rogers says. “Fielding is very bright and very capable of running it. It’s a good thing for older generations to part with the control, particularly when the younger generation wants to become immersed in it. I’m scrupulously trying to avoid the family battles that multigenerational companies have.”

Fielding currently serves as executive vice president. His younger brother and sister are also shareholders, and help to mix batches of Ale-8-One’s secret formula during breaks from university studies.

Fielding is overseeing expansion through distribution agreements with other bottlers, producers and distributors. “We’re a little company —a tiny company by comparison [to bottling giants Coke and Pepsi]. But we have a very stable market here,” Frank Rogers says.

“It is the taste and flavor of our products that carry us,” Fielding adds.

Sally M. Snell is a writer based in Topeka, Kan.

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A look at the history of Smith Software Development is a trip down technological memory lane. The company was founded as Tri-State Data Processors in 1970 by brother- and sister-in-law Joan and Andrew Smith. Joan’s son, Noel Smith Sr., now 55, began working for the company in 1975 but left to join the Navy. He and his wife, Nannette, now 49, opened Alabama Business Computers in 1979, the year he returned from Navy service. The company had offices in Montgomery and Mobile.

In 1999, Noel Sr. developed an autoimmune disease that left him unable to run the company. Nannette and her son Noel Jr., now 26, decided to launch a new software company that wouldn’t be encumbered by the complex array of business arrangements that Noel Sr. had negotiated. The family’s existing companies were closed down, and all of their business endeavors were restructured as Smith Software Development.

The business transitioned from hardware sales to software development and partnered with hardware companies specializing in niche markets to develop industry-specific solutions.

A turning point occurred in 2003, when Nannette got a call from a local boat dealer. The panicked owner of the dealership—also a family-run business—said he needed an inventory management software system quickly or one line was going to pull his status as a dealer. Within a month, the Smiths had installed some features from their company’s Beyond 2000 inventory management system and modified them for the dealer’s needs. It was their first marine-industry job.

The Smiths worked closely with several boat dealers to fine-tune the system. As the family learned more about the marine industry, what they saw appealed to them. Most marine dealers are family businesses; even more important, existing software for the industry was expensive and inefficient, Nannette says.

For the Smiths, it was also a marriage of passion and profit. “We’d never been involved in boating as a business,” Nannette says, “but my family has always loved boating.”

The Smiths added features to the software, which they renamed the Beyond 2000 Marine Management System. They received help from major manufacturers in the industry, which recognized the need for their dealers to have efficient and affordable dealer management and inventory tracking systems.

Nannette says working primarily with family businesses “leads to a good mutual understanding. You understand that when they’re passionate about things, they’re not being rude or angry. Their life revolves around the business.”

Son Josh, 23, who works in technical support and product development, says a strong level of trust has developed between Smith Software and its clients. “It lets us communicate better with them,” Josh says, “because we understand what it’s like when everyone has something invested in the project, more than just an hourly wage.” Another son, Ryan, 20, lends a hand on the finance side.

Noel Jr. says he’s been inspired by some of his customers who have instilled solid business values and a strong work ethic in their families’ succeeding generations. Through their example, he says, he’s recognized the importance of building on the core business rather than insisting on growth for growth’s sake.

From that first client, Smith Software Development has grown its customer base to more than 1,000 dealers. In late 2007, Honda Marine recommended the software in a newsletter sent to dealers. As a result, Nannette anticipates exponential revenue growth in 2008.

Gwen Moran is a freelance writer based in New Jersey.

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It may seem odd that a company that generated an estimated $13.2 billion in revenues in 2005 and was ranked at No. 10 on Forbes’ list of America’s largest private companies is considered a small player in its market. But with 65,000 employees and 170-plus stores, Meijer Inc. (pronounced “Meyer”), a grocery and merchandise chain that operates in five Midwestern states, is vying with Goliaths like Wal-Mart.

“While we are fairly large as a private family business, in our field we are going against the $50 [billion] to $320 billion national and multinational organizations,” says co-chairman and co-CEO Hendrik (Hank) Meijer, 55, a grandson of the founder. “We are small in that we are not able to do what they do in procurement and importing, which means that we need to continuously learn how to be smarter on the smaller scale.”

Meijer, based in Grand Rapids, Mich., and founded in 1934, is credited with pioneering the superstore concept. The company opened its first modern-format store in 1962, combining grocery and department store items. Meijer’s stores—in Illinois, Indiana, Kentucky, Michigan and Ohio —average 200,000 to 250,000 square feet, about the size of four conventional grocery stores. Meijer shoppers can select from about 120,000 items, including apparel, electronics, hardware and toys as well as groceries; many Meijer stores also sell gasoline, offer banking services and have in-store restaurants.

Though his stores can’t compete on price against big-box behemoths like Wal-Mart and Target, Hank Meijer says he welcomes the challenge. “The competition can also be wonderful in that it truly focuses your mind,” he says.

Definable differentiator

Meijer has presented itself as an attractive alternative to the big-box competitors by emphasizing its regional flavor. The stores sell locally grown produce, offer some food items that are available only at Meijer and stock shelves with products that appeal to the demographics of the area.

“Even though you may know the individual demographic, that does not mean that you will know what truly touches the people,” explains Hank’s father, chairman emeritus Frederik (Fred) Meijer, 87, who remains very active in the company. “This is an art and a connection—not purely following numbers. This is one of the hardest aspects to capture.

“We have always known that our differentiating factor is all in the eyes of our consumer base, and what they think the difference is—satisfying that is what really matters,” Fred says. “Our approach has been to put forth a solid vision [and] pursue it.” That vision, according to the company, is: “We will provide our customers with a compelling range of fresh solutions at great prices in a convenient format.”

According to Hank, Meijer’s mission to be there for its customer was the key driver in the 1988 decision to keep the stores open 24 hours, every day but Christmas.

In making sure that Meijer continues to accomplish its goals, Hank notes, the management team has done a lot of soul-searching. “We rediscovered that even though we have thought of ourselves as a one-stop-shopping supercenter, in the minds of our customers we are a supermarket with much more,” says Hank. That revelation led to a two-pronged strategy, he notes. The first conclusion, he says, is that the company must work to make its general-merchandise offerings more compelling. The second is that “we have the obligation and requirement not just to be very good in food, but to be excellent in food.”

Even amid the competition from the giants, a regional chain has some advantages over a national one, Fred asserts. “This is one area where we can really understand our customers—far better than someone operating 3,000 stores,” Fred says. “While we have more stores than some of our supermarket-only competitors, we are still in a position to know our people and customers much better than the big guys.”

Thomas V. Schwarz, the director of Family Owned Business Institute at Grand Valley State University’s Seidman College of Business in Grand Rapids, points out that in Meijer’s Midwestern market, “People know that they are ‘one of us,’ treat consumers well and give large amounts of money to local communities—something that is rarely done by national chains. However, in keeping the loyalty they enjoy, Meijer must continue watching the market, embracing innovation and matching any initiative Wal-Mart brings to the table when feasible.”

A changing market

Family-owned and other small grocery chains are giving way to mass marketers in many regions across the nation. Santa Monica, Calif.-based “supermarket guru” Phil Lempert, food trends editor and correspondent for NBC News’ Today show, says the companies that are buying up independent grocers are hoping to exploit the smaller chains’ relationship with their client base. “The larger chains are gobbling them up in hopes of emulating the benefits that make them special,” Lempert says.

Meijer itself was the subject of merger rumors in November 2005, when The Grocer, a U.K. trade journal, reported that British company Tesco was seeking to buy 49% of the company. Meijer denied the report; the family sent a memo to employees that said, “[W]e are not negotiating with any company for the sale of any part of our company. Our family is committed to Meijer’s future and to our success.” Hank says the rumors “were apparently started by an analyst in the U.K. and completely without foundation.”

More than 400 people are employed at the average Meijer store. In order to operate more efficiently and keep costs and prices on pace with its global competition, Meijer has trimmed its staff in recent years. The company cut 1,900 management jobs in 2004, the largest downsizing in its history. That cut was preceded by a reduction of 350 salaried positions in 2003.

“We were completely united in recognizing the need to make our company more efficient and effective,” Hank says. “Wherever that transformation affected someone’s job, we worked hard to think through each move, and then tried to help those affected consider alternatives.”

Meijer has also altered its growth plans. Five years ago, for instance, the company was focusing on aggressively entering the Chicago market. But as larger competitors started moving more stores into Meijer’s established territory, the company opted to instead open only ten stores in Chicago and add more stores in its existing Illinois, Michigan and Ohio markets.

“Yes, we knew that by opening additional stores in these markets that we were going to take some business from our existing units,” says Hank, “but if we didn’t do something to capture more of this market, someone else might. Ultimately, this led us to strengthen our position and fill some holes that we did not initially see.”

Putting its best foot forward

Meijer’s recent plans also have included remodeling two-thirds of its existing units. Pharmacies have been moved to the front of the store, making them more convenient for customers; drive-through pharmacy service has been added in many locations. The stores’ electronics departments also have had a face-lift.

According to Hank, the overall goal was for Meijer to put its best foot forward. “Seeing that we had been around a long time it meant that we had physical locations that were getting old,” Hank says. “So we really needed to reallocate our assets in a manner to best improve our formats.” He says he’s been satisfied with customers’ response to the remodeling efforts.

The chain has experimented with an array of concepts over the years. Its website (www.meijer.com) now features a specialty foods area where shoppers can order kosher, organic, international, and health and wellness products. Recently, it’s expanded its Meijer Gold premium products into most of its supermarkets.

Acknowledging that the health of the Meijer brand will ultimately depend on maintaining its reputation as a low-cost, reliable retailer that exceeds customer needs, Hank and his non-family co-CEO, Paul Boyer, have revised the company’s cost and price structure. “Paul really made us recognize that if we were going to have a future as a low-price mass merchandiser, we needed to be low-cost as well,” Hank says. “This altered our direction so that our key priorities were on survival and then growth.”

The company aims to eliminate operational waste without sacrificing customers’ service expectations, which has required it at times to take measures such as restructuring the workforce and adopting new technologies. For example, Meijer has installed radio frequency identification chips in shopping carts in test market locations. The technology alerts management as customers head toward the checkout so more lanes can be opened as needed, thus speeding up the checkout process.

“We now have a much stronger platform primed for stability,” Hank says, “and what we are trying to do now is figure out and embrace a model that will effectively help us avoid taking the dangerous ‘me too’ philosophy that usually kills a business.”

>Family and non-family managers

Hank’s brother Doug, 53, serves along with him as the company’s co-chairman; their youngest brother, Mark, is CEO of Life EMS Ambulance Service in Grand Rapids. Meijer family members say they strive to protect the family feeling at the company. “We work hard at knowing our team members and making them feel a part of the family,” says Hank. “This is easier said than done, but we also know that it provides a cultural advantage. Obviously, the [superstore] format still has to be there, but you cannot overlook the value of cultural advantages. This allows you to be in tune with what is happening in the individual markets rather than continuously worrying about what is happening in China or Mexico.”

Jack Veale, principal of West Hartford, Conn.-based PTCFO Inc., a management advisory firm for family-owned and privately held businesses, agrees that this type of loyalty helps set Meijer apart. “It makes their employees want to continue bringing forth the results and new ideas that solve customer needs,” Veale says. “Historically, they have been very good at it, but Meijer needs to make sure that they keep this loyalty in place. These outside talents are the true DNA of the future.”

In fact, Meijer has looked to non-family executives often in its history. “We learned this early on, in that we grew up with people outside the family serving as president even as our father was fully involved in the business,” Hank says. “We always recognized this need, and we were very fortunate to have people take the reins. Just because the name is on the door does not confirm any special talent. Instead, it usually means that there is an ego that makes you think it does.

“The family cannot think about expanding until the components are in place to trust someone else,” says Hank. “It was the willingness to trust someone else with the keys at the third store that led to accepting the fact that the best leadership is not always a family member. You need to be able to trust someone else with your livelihood and then provide the support necessary for these individuals to succeed.”

In the 1980s and ’90s, Fred Meijer acted as chairman and focused on long-term concerns, while non-family president Earl Holton managed daily operations. In 1999, non-family executive Jim McLean, who had been with the company since 1986, became president and CEO. In 2002, McLean resigned and Hank became CEO; Boyer, who had been executive vice president, was promoted to president and chief operating officer. “All along, the whole intention was to get a Meijer back” in the CEO post, a company spokesman told the trade publication DSN Retailing Today at the time. Boyer, who has been with the company since 1970, was named vice chairman and co-CEO in 2005.

The next non-family president, Larry Zigerelli, served for only about seven months in 2005. Zigerelli, who had joined Meijer in 2002 as senior vice president of marketing and advertising after three years at CVS Corp. and 18 years at Procter & Gamble, left at about the same time the Tesco rumors were circulating, but Meijer executives stressed that his departure was for personal reasons.

In August 2006, Meijer named one of its board members, Mark A. Murray, as president. Murray had been the president of Grand Valley State University. News reports quoted Fred Meijer as saying the company looked outside retailing because it wanted to take a “different approach.”

The Meijer family is committed to reinvestment in the company, keeping dividends low, Hank says. “We recognize that we will not be able to get our prices as low as our giant competitors, but we also do not have to answer to the expectations of the public markets,” Hank says. “This means that we have the money available for reinvestment. We need to be profitable, but we would much rather reinvest for the long term than continually pull out.”

Family ownership, consultant Veale says, frees the company from “the mentality that you need to make next quarter’s numbers or the stock is going to drop.” Managers at family firms like Meijer, he says, “get to avoid wasting time focusing only on numbers.”

Looking forward

Because the oldest of the five next-generation members is just 21, it remains to be seen whether any of them will one day run the company, Hank says. While he hopes the younger Meijers will join the business, “It is way too early to presume anything. We do not know where interests or competencies lie,” he says. “We hope that they view it as something worthy of continuing, as opposed to a source of money.”

Both Hank and Fred are quick to point out that they do not want to force anyone in the family to join the business. “I know when I got out of college the last thing I wanted to do was come back and work for the company, so I do not want to see someone in future generations automatically come into the business,” says Hank, who started working for Meijer at age 11 as a bagger. After college, he worked as a reporter for a southeastern Michigan suburban newspaper group and then became editor and publisher of a weekly newspaper in suburban Detroit for about four years. He rejoined Meijer in 1979 as assistant advertising director and became marketing director in 1982.

Hank says of the family’s next generation, “It is great if they have the drive and zeal, but if they can benefit from outside experiences they are going to feel better about themselves and bring fresher eyes if and when they do come to the business. There is truly a benefit to following your passion rather than having a point where you feel like you are trapped.”

Fred is even more emphatic. “If they are not interested, they should not continue the business,” he asserts. “If there is not the interest or ability in the family, then you need to consider selling before the legacy is damaged and the loyalty is hurt. We would like to think that we are an honorable family that has done a good job. If ever the family does not take an interest or does not have the ability to continue on, I hope that they see that and sell out to someone that has the desire.”

Peter Fretty is a business writer based in Whitehall, Mich.

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It was a restaurant owner's worst nightmare.

In 1996, a customer contracted salmonella after eating at one of five Duke Sandwich Shop locations then owned by the Smart family in the former textile town of Greenville, S.C. And then another person got sick. And then another.

Within a few days, the state health department determined that the salmonella outbreak, traced to spreads made at the restaurant, had affected more than 200 people. It was the worst outbreak of salmonella in South Carolina history, a state record that stood until 2005.

Day after day, the local media chronicled the bad news. The Greenville News reported that an elderly woman died from complications of salmonella, and an infant was born with salmonella because of the outbreak. According to the newspaper, nearly 600 people contacted the health department. Many guests who had gotten sick sued the restaurant.

Facing what appeared to be irreparable harm to the company name, many business owners likely would have closed up shop. But Richard Smart, then the company's president, wouldn't let that happen. Richard brought flowers to sick customers, helped with medical bills and tightened the company's belt in preparation for rough times, ultimately scaling back from five restaurants to three.

Despite all the bad press, Richard Smart never called attention to what he was doing behind the scenes, says his son Andrew, 27, now the company's president and co-owner along with his mother, Cheryl, 53. “My dad did it because he knew it was the right thing to do,” Andrew says. In fact, he notes, family members didn't know how far his father went to help outbreak victims until after Richard's death in 2002. “People would just come along and tell us what Dad did,” says Andrew, who began his family business career at age five by taking out the trash and packing away bread.

Jim Edwards, one of the customers who got sick, says he never thought about suing the restaurant. He's been eating Duke's egg-salad spread sandwiches for almost three decades.

“They were always good to me, so I stayed good to them,” says Edwards, who remembers getting several phone calls from Richard Smart while recovering.

The late restaurant owner never sought a consultant's advice on how to respond to the crisis. But his instincts were good, notes Steven Fink, president of Los Angeles-based Lexicon Communications, a crisis-management firm that worked with the Jack in the Box chain during an E. coli outbreak in the early 1990s. “He showed compassion, which was the right thing to do,” Fink says. The consultant says he also would have advised Smart to let the public know what the company was doing to rectify the situation, but in hindsight Richard's low-key approach didn't seem to hurt Duke Sandwich.

Ultimately, the courts found that Duke Sandwich was not at fault for the salmonella, which had originated in tainted eggs sold to the restaurant by one of its suppliers. All 53 lawsuits against the restaurant were eventually dismissed, according to Greenville County court records. The other companies involved paid $4.5 million to settle the various suits.

Andrew Smart says there was a small hiccup in sales the first few months after the salmonella outbreak, but within a short time after the news reports appeared, customer traffic returned to normal. He says reports on exactly how much business was lost are not available.

Smart reports that the family learned the power of dealing with an issue head-on and honestly after the outbreak. “My dad was someone who always believed in dealing with people directly,” he explains. “That was how he believed businesses should be run.” Andrew Smart says his father rarely spoke about what happened. By the time Andrew took the company's reins in 2002, the lawsuits had been settled.

By 2003, he was looking for a way to get the business growing. “I was just praying for a direction to go in,” he recalls. He decided on franchising, he says, because it would allow the company to expand without opening new stores that would be owned by the family.

The first franchises were sold across South Carolina in 2004. Today, the restaurant is offering its recipes and business system throughout the Southeast. “The business is stronger today than it ever was,” Smart says.

From wholesale to retail to franchise

Duke Sandwich Co. was founded in 1917 by Eugenia Duke, who sold her homemade spread-style sandwiches to textile mills, military bases and drugstore chains. Her business quickly boomed, and soon she had to make a decision. Her mayonnaise brand was doing as well as the sandwiches. Which one to keep? She decided to stake her claim in mayonnaise and sold the sandwich company and the recipes to her bookkeeper, Alan Hart, in 1920. While the companies have remained separate since then, Duke Sandwich uses only Duke's Mayonnaise, according to Andrew Smart.

In 1964, Hart sold the company to his brother-in-law Loran Smart (Andrew's grandfather), who invented a sandwich-wrapping machine that sped up the production process and expanded its wholesale business. By this time, the company had also opened its first restaurant, located on Poinsett Highway, which leads north out of Greenville toward the mountains.

Loran's son Richard, who had been a professor at Georgia Tech, bought the company in 1978 and moved the restaurant across Poinsett to a one-story brick building he built himself. With its white columns and 18-foot-high sign, it stands out from the auto repair shops, car lots and thrift stores along the highway. It's the largest of the Duke restaurants, with 17 tables and a lunch counter.

Jim Miller stops by at least once a week to get a pimento cheese sandwich and watch the cars and trucks passing by on Poinsett. “There is something different about this restaurant,” he says, nibbling up some spread that had gotten on his hands. “It's not fancy, but it's not cheap. I guess you can say it feels like home.”

Andrew Smart's office at the company headquarters behind the Poinsett Highway restaurant is decorated with black-and-white photos of the company's trucks parked along a busy Main Street. Other photos on the walls depict Eugenia Duke; vendor carts known as “dope wagons,” which sold her sandwiches to textile workers; and various members of the Smart family, as well as some images of the future: Andrew Smart shaking hands with franchisees.

“Franchising is very big right now,” Smart says. “People want to be part of a company that is doing well.”

Smart feels several things are driving the demand for franchises. One is the company's distinctive menu, which gives customers an alternative to the hoagies and burgers available at countless restaurants nationwide. Duke's offerings include chicken salad, pimento cheese, cream cheese with pineapple and pecan, deviled egg and minced barbecue.

A second advantage comes from Duke's wholesale catering services, run from its sandwich packing plant in Shelby, N.C. It's a lucrative second income on top of drop-in sales, Smart says.

Franchise owners need not have a food industry background; spreads and soups are provided for the owners, Smart notes. All the franchisee has to do is make and wrap the sandwiches.

Even so, Smart says, prospective franchise owners must undergo a screening process designed to determine their willingness to succeed. “I've turned down about three times as many as I have accepted,” he reports. So far, Duke has sold 12 franchises; Smart says he plans to add 20 more in 2006.

And within ten years? “I have no doubt we can be nationwide,” he says.

John Boyanoski is a writer based in Piedmont, S.C.

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When you think about servicing customers, you should consider that consumers shop fewer stores today. Because of increasing time constraints, by the year 2000, Americans making a major purchase will probably visit only 1.3 stores.

This is not the result of fewer stores and fewer choices. On the contrary, there are more choices than ever. What’s changing is the customer. Today a retailer who advertises a product but then doesn’t have it in stock catches more flak than he did 5 to 10 years ago. A consumer today considers that a retailer who runs out of inventory has committed a personal affront: “Look, I read your ad and I came to your store. I gave you my time and now you’ve abused it.”

What this tells us is that today’s customer wants to get in and out of that store as fast as possible. He values his time and he expects you to respect it. When it comes to buying furniture, for instance, he expects to spend about 23 minutes in a store looking. And although this is his ideal perception of time spent, he will tolerate spending as much as 45 minutes in a store when actually making a purchase. Our research also reveals that it takes at least 50 percent longer to sell to multiple decision-makers. So if it takes 45 minutes to sell a single buyer, you can add on another 22 1/2 minutes when you’re selling a couple. A furniture retailer who knows this can employ enough knowledgeable salespeople to provide quick answers to customers.

Retailers who devise more ways to respect the customer’s time are providing definite services. For instance, a store could reduce the wait for a salesperson, provide clear signage to direct the customer, have a more natural traffic pattern, and so on. This brand of service is just as important as fast checkout or a prompt delivery truck.

One of my clients, Ivan Steinberg, head of Steinberg’s, a chain of successful electronics and appliance stores in Cincinnati, understands the multiple meanings of service very well. When I first did a study for Steinberg’s, Ivan wanted us to find out why his stores were not getting the same amount of repeat business as in the past. Ivan’s father had founded the store in 1921, and for years it sold crystal sets and battery radios. Ivan entered the business in 1950, and shortly thereafter, the store began carrying televisions. Today, with 19 stores, it is the market leader in the Cincinnati area. However, when Ivan first contacted me, business was beginning to slip. Concerned, he asked me to find out what his customers and other stores’ customers thought about Steinberg’s.

I delivered the information our research confirmed concerning how the Steinberg’s service department was viewed. The company was using outside service agencies, which took three to four days to service customers. Ivan had been so close to his business he wasn’t aware that the competition was providing superior service. Based on my recommendations, Steinberg’s found ways to shorten the time to make service calls, and business picked up. Then Ivan asked, “With our improved service, Britt, we’re starting to get a lot of repeat business from our customers. But what can we do to perform even better?”

“Our study also revealed that your stores look stale,” I replied.

“Stale? But they look fine to me,” he answered.

“That’s because you see them every day and are used to them. Now, if you really want to generate repeat business, here’s what I suggest.” Then I explained what was needed to redo the physical appearance of his stores.

Following my advice, Steinberg’s began a campaign to either remodel or close every store in the chain. It made a huge difference. Then Ivan asked, “What else do you advise?”

I told him, “I think there’s a lot you can do with the appearance of your salespeople.”

With this recommendation, Steinberg’s inaugurated a dress code for its sales force. Today, when you walk into Steinberg’s, customers have no problem identifying the salespeople. Every male salesperson wears a dark blue blazer, gray pants, a tie, and a solid blue or white shirt. “They look like they just came out of Harvard,” Ivan says proudly. “Now when you see the appearance of our store and our sales force, it’s quite impressive. There’s really a difference between us and our competition.

“We finally looked through the customer’s eyes,” Ivan continues, “and we asked, ‘Where would you buy? Would you buy from our store or from the competition?’” While Steinberg’s always had the reputation of having the lowest price, price by itself is not enough today.

Ivan Steinberg is a fast learner. He recognizes what I tell every client: “Today’s biggest challenge with a customer-driven company is that competitors will sometimes add a new and improved service—or customers simply change. This means that the excellent service you provided yesterday may not meet your customer’s needs today.”

A recent survey we conducted shows that the American consumer measures service in a retail store by the following 10 standards, in order of priority:

• The employee shows that he or she wants to be at work. Customers can sense how your people feel about their jobs. Employees who are well treated reflect that in their performance.

• A salesperson is available to offer genuine suggestions. Customers don’t want a salesperson to “bother” them, but they do welcome good advice.

• The store is clean.

• Signage makes the store easier to shop. People don’t want to waste time looking for merchandise. Don’t confuse them with poor signage.

• The salesperson is knowledgeable and also knows the store’s policies and procedures. In addition to product knowledge, the salesperson should know what the store can and can’t do for customers.

• The store’s return policy makes the customer feel the retailer wants to satisfy him or her.

• The store guarantee has no exceptions. Customers don’t want to feel a guarantee has fine print that takes away what is provided in the big print.

• The store has wide aisles. This makes it easy and fast to shop the store.

• The salesperson is a well-dressed professional.

• The store has a 30-day, complete-satisfaction guarantee. Customers don’t really expect you to give them their money back on a product if they have waited an unreasonable length of time to express their dissatisfaction. But they do expect you to provide a broad guarantee for a 30-day period.

We conducted another study that focused on how companies measure another company’s service—for example, a manufacturer that buys machinery from another manufacturer, or a retailer that buys merchandise from a wholesaler. This study did not involve a consumer product. As a result, a different set of criteria is used. The reasons for satisfaction are, in order of priority:

• The orders are shipped complete and in full. When business owners order goods from a manufacturer or supplier, they place great importance on having the complete order shipped on time and in full. They don’t want goods coming in piecemeal.

• The company honors its commitments. If a company says it will do something, it follows through. For instance, if the company has agreed to rush an item or provide X amount of advertising dollars, it fulfills that promise.

• The company’s reps promptly return calls when notified of a problem. A rep must be more than the initial salesperson. He must be available later when things go wrong. The rep is expected to handle the problem.

• Goods are delivered on time and in good shape. Today’s companies won’t tolerate late shipments. If it’s supposed to be delivered on Monday, it had better arrive on Monday. Tuesday is too late. With more companies running on just-in-time delivery schedules, they will not tolerate late deliveries—or worse, damaged goods.

• Senior management is expected to make regular visits to a customer’s headquarters. Today’s business customers want the company’s top decision-makers to visit them at their plant sites. They want senior management to have first-hand exposure to their problems. Although this priority is listed as fifth, it’s being expressed more today than in the past. Our studies indicate that 70 percent of managers say they have difficulty getting the top-ranking executives with whom they do business to visit them.

Our survey of department store customers showed there were 147 ways they measured customer service. Here are the top 15 ways, in order of priority:

• The store is clean.

• The displays are impressive.

• Brand names are properly used and visible.

• Within eight seconds, the customer is made comfortable.

• Excellent sales event presentation is matched by low sales prices.

• The salesperson’s professionalism is reflected in his or her attire.

• Store management communicates, “We are the best,” and the customer can feel it.

• The store gives customers extraordinary treatment through the total retail experience with no breakdown.

• The customer hears “thank you” and feels it is sincere.

• The customer’s knowledge is respected during an exchange and sharing of information.

• Customers are asked questions about their personal needs—and feel the staff are involved with what they want.

• Customers see staff as empathetic—as putting themselves in their shoes.

• The retail experience involves a relationship, not just selling the merchandise.

• The salesperson makes quality suggestions, not phony ones.

• The salesperson assists the customer to buy quality.

If you can log only one number into your memory, it should be the 1.3 stores per major purchase that the American consumer will shop in the year 2000. Coupled with the fact that there will undoubtedly be more stores with more choices than ever, this alarming number substantiates that if you are not the first store shopped, your prospects are severely limited.

Not only is this 1.3 number a warning for America’s retailers, it is also a strong signal for every manufacturer, distributor, and service company. All customers are demanding more, and if you don’t give them what they want, it is certain that your competition will.

 

C. Britt Beemer is founder and chairman of America’s Research Group, a Charleston, South Carolina, firm specializing in studies of consumer behavior, and has managed political campaigns for members of Congress.

 

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From all outward appearances, this company could be just another one of those slick, high-tech ventures in California's Silicon Valley. The suburban headquarters is filled with casually dressed, friendly young people who could pass for yuppies. The president has years to go before turning 40, and the 300 or so office workers attend monthly wine-and-cheese parties.

Actually, Great Plains Software is set next to a shopping mall in the middle of some freshly plowed wheatfields in Fargo, North Dakota, a part of the countrybetter known for sugar beets than for BASIC. The "yuppies" are drawn mostly from local North Dakota and Minnesota colleges, and the parties run more to Miller beer and Swedish meatballs.

In this unlikely locale, Great Plains is harvesting a bumper crop of customers for its line of microcomputer-based accounting programs. One analyst estimates the company's 1989 sales at $22 million, making it the second biggestU.S. producer of sophisticatedPC-based accounting software.

More remarkably, the family that built Great Plains spans epochs in America's economic history. When it took over the tiny company in 1984, the Burgums had had 78 years of experience running the Arthur Farmers Elevator Co., a grain elevator business in nearby Arthur, North Dakota, population 440.

The Burgum family — whose forebears came to North Dakota in covered wagons — have found a strong bridge between the grain elevator business andcomputer software: customer service. "I'm conducting business the same way that you have to in a small town where everybody knows you," says Doug Burgum, Great Plains's 34-year-old president.

More companies talk about customer service than actually deliver it. In places like Arthur, however, where customers are friends and neighbors, you learn early what those words mean — and you'd better deliver if you want to stay in business. For generations, the Burgums have been dealing face to face with the families who own local farm businesses. Now, however, they are serving faceless thousands across the country, with tools like disks and modems.

The Burgums' successful leap into a postindustrial, knowledge-based economy demonstrates that while some things change, basic business values like good customer service remain the same — and are, in fact, transferable between the unlikeliest environments.

The person most responsible for beaming the Burgum family into the computer age is Doug Burgum, who left Fargo as a young man. After earning a Stanford MBA, he went to work in the Chicago office of the high-powered McKinsey & Co. management consulting firm. Six years ago, in a move tantamount to convincing a crop duster to pilot the space shuttle, he persuaded his brother, mother, two cousins, and an uncle — the board of the Arthur Farmers Elevator Co. — to buy a little software venture started in the back room of an Apple computer store in Fargo.

The Apple store had opened on Fargo's main street in 1981. In those covered wagon days of personal computing, not many people knew Apples from oranges, mainly because there was little application software around. Out of desperation, the owners of the Apple store put two programmers to work in a back room to create some. They figured that if there was a way to jumpstart personal computer sales, an accounting system — essential to any enterprise — was the way to do it.

By 1983 the shop's software venture had a product and enough sales to stand as a separate company, which was named Great Plains Software. It had also gotten big enough to need a vice-president of marketing and sales. That's when Doug Burgum got the call. When asked to join a dinky 20-employee software firm in Fargo, Doug says, "My initial reaction was, 'You've got to be kidding!"' At McKinsey, he dealt with Fortune 500 executives twice his age and lived only blocks away from the yuppie playground of Chicago's Rush Street.

Then again, he wanted to return to North Dakota, and he had always had entrepreneurial leanings. (He'd started a chimney-sweeping business in college.) What's more, at McKinsey, he was starting to see that "no matter how good your work was, you were still just recommending and persuading, rather than deciding and acting."

So he went for it, and a short time later, bought an ownership stake in the fledgling company with his own money, by mortgaging some croplands he had inherited from his father. His $260,000 investment amounted to big money for the company back then. But it still wasn't enough for the growth it was contemplating. In the search for venture capital, the owners began exploring an alternative that would solve their funding problems and enrich them too- — selling out.

Burgum opposed the idea; he had not left the big time to work for someone else. And it just so happened that his own family's Arthur Farmers Elevator Co. in his hometown of Arthur had just sold its 50 percent stake in a Fargo-based seed company. The Burgum family wanted to invest the money elsewhere. They had considered buying another elevator, farmland, even buying a bank. But Doug had another proposition for them: buy Great Plains Software.

You would think that the Burgum family would have taken substantial pause before plunking their money down on a business as familiar to them as an air-conditioning venture might be to an Eskimo. But to hear them tell it, they took to the idea with equanimity. After all, says Joe Peltier, a cousin who co-manages the grain elevator company, this wasn't the first time the family had entered unfamiliar territory. For years it had operated the generating company that provided Arthur with electricity. "It wasn't that foreign to try something different," Peltier says.

It didn't seem like such a big gamble, really. As Doug's mother, Katherine, points out, "It looked like less of a risk than reinvesting in agriculture. In the farm business there are so many things you can't control — the weather, the government, the bugs."

Thus undaunted, the Burgums, in a transaction that took three weeks from start to close, put $2 million into Great Plains, making it their second family business.

Except for Doug, none of the Burgums has a direct operating role in Great Plains. But as owners and board members, Burgum's mother, brother, two cousins, and an uncle take an active though low-key role in its affairs. That raises the question: What could a family in the grain elevator business possibly have to contribute to running a software venture? Technologically speaking, its members are, well, virtual rubes. But bumpkins, especially at business, they are not.

The Burgums have been running the elevator in Arthur since Doug's grandfather, J.A. Burgum, acquired it in 1906. Today it is in the hands of the family's third and fourth generations. Cousins Joe Peltier, 61, and Rick Burgum, 44, co-manage the Farmers Elevator Company. Doug's brother Brad, 38, is a certified public accountant, attorney, and volunteer ambulance driver in nearby Casselton.

If there is a central figure in the Burgum clan, it is Doug's mother, 75-year-old Katherine Kilbourne Burgum, otherwise known as "K." One of North Dakota's best-connected citizens, she has served on a flock of state and national councils, including the Republican National Committee. Her diminutive size — she's under 5 — feet belies her influence at Great Plains. She has had a direct hand in recruiting some of its top executives.

Along with other family members, she regularly attends company functions. Employees find it easy to talk to them. "In some companies, it's a nervous situation talking to the owners," says Bob Gifford, the company's senior vice-president of research and applications development. "But K. and the family do not make people nervous."

Of course, it's hard to have too many pretensions when you come from Arthur. Forty miles from Fargo, the tiny town hasn't changed much over the years, although it does now have a "mall," which consists of a bank, the post office, a small lunch counter, and two stores. Commerce in Arthur, however, is still dominated by the grain elevator owned by the Arthur Farmers Elevator Co., which now owns elevators in four other North Dakota towns, and has annual sales of $40 million, nearly twice those of Great Plains's.

In six years, the family has plowed another $2 million into Great Plains. But along with capital, it has given Great Plains some of its own good ole' fiscal conservatism. Joe Peltier says that if he's had any impact, it's been by promoting a succinct philosophy: "Go slow."

Burgum says members of his family seem just like bankers, a familiar role for them. The elevator company often extends credit to farmers. Even if they're baffled by the technology at times, Burgum says, "These guys understand the numbers. They make sure we don't go too far too fast." So far, Great Plains hasn't: Its debt, for example, is almost zero.

The biggest contribution the family has made to Great Plains is emphasis on customer service. "We don't want Great Plains to conduct business any differently than we do," says cousin Rick Burgum. How is that? Well, brother Brad explains, "The elevator business is really a service industry."

In fact, service may be about the only way the Burgums have to differentiate themselves. "There's an elevator in every town," says Rick Burgum. "Everyone sells the same kind of product."

These realities of small-town life make good service critical. In a small town, there is no place to hide. Disappoint one customer and everyone, including family, friends, and neighbors, knows it. Lose just one customer, and you lose one big customer, perhaps for generations to come.

So the Arthur Farmers Elevator Co. lavishes a lot of attention on its customers. Cousins Rick or Joe will shoo themselves out to a farmer's field at the drop of a seed-company cap. One day last spring, Rick abruptly excused himself from a meeting to see a farmer about a new granulized herbicide which was not dissolving in water as promised. Rick hauled a sprayer from the elevator out to the field, in an effort to get the chemical down on the ground properly.

Burgum has imbued Great Plains with this same at-your-service ethic. The family may have moved off the farm, says Doug, but it brought a lot of what it had learned about life and business to Great Plains Software. For one thing, Burgum has given Great Plains a decidedly small-town feel. The lobby contains pictures of its employees, arranged like pages out of a yearbook. On a map in one corridor, colored pins mark each employee's hometown.

To consider the customers' needs first is not a matter ofsentimentality; it makes consummate business sense.Burgum believes that hiscustomers want support morethan anything else, especiallywhen it comes to the smallerbusinesses that typically usePC-based accounting software. For many of them, aproblem with their accounting software could threatentheir ability to survive. Whatwould happen if a small company suddenly finds its receivables in an electronicallyscrambled mess?

For this reason, Great Plains has made a strategic commitment to respond to customer problems fast. "The right answer in this business three days later is the wrong answer," Burgum says. "The right answer is the right answer when the customer needs it, which is now. If your attitude is that customer service is not an expense but an investment — if you believe in your heart that it can lead to competitive advantage — then it's easy to get enthusiastic about investing in people and systems."

Great Plains's customer service staff consists of 106 people, a third of all its employees. Its technical support specialists, who work by phone for the most part, are not just drones wearing headsets and recording complaints. According to Lori Boldt, the company's 30-year-old vice-president of customer assistance, all of its reps have at least a four-year college degree. Three colleges in the Fargo area alone — North Dakota State, Concordia, and Moorhead State — keep it supplied with qualified applicants. Last year, the company processed 3,000 applications. Although the company taps people with majors from engineering to English Lit, applicants have to have at least one year of accounting under their belts.

Applicants' academic credentials, however, may be of less concern than their problem-solving, communication, and teambuilding skills. Through five interviews, they are quizzed about their ease with accounting systems, with computers, and, more importantly, about their inherent interest in it all.

"We're looking for somebody who is willing to take a risk and make a decision in favor of the customer," Lori Boldt says. To identify that ability, Great Plains's interviewers pose hypothetical situations. Or, if the applicant has experience in dealing with customers even as a clerk, they will ask a simple question: What is the toughest customer problem you ever faced, and how did you handle it?

Once picked, Great Plains's customer-support specialists are put through a six-week training course. The curriculum is meant to help these new hires learn the software, but that's not all. "We're not trying to teach people answers as much as we're trying to teach them to make decisions," says Boldt. "They should feel good about making decisions; we want them to do what's good for the customer, whatever it takes, without giving away the store." They're also taught telephone techniques, listening skills, even how to read a caller's emotions by noting certain cues, such as pauses that might hint at embarrassment and the need for gentle hand-holding.

To familiarize new hires with the company's culture, they are buddied up with veteran employees, who make sure they are included in such socializing as get-togethers at the proverbial after-work watering hole. This buddy system helps build esprit de corps, which goes a long way toward preventing the high burnout and turnover rates that usually plague such heavy telephoning, customer-relations jobs. Boldt figures less than 5 percent of her staff leaves every year compared with 15 percent or so elsewhere. Much of that difference stems from her own morale-building management style. She sees to it that the department regularly holds theme parties, and spends a lot of time knowing "what's going on in their personal lives."

In a unique compensation structure, customer-service specialists can raise their base salary by as much as 10 percent a year, based on a six-month subjective review and a more objective series of two-hour timed tests — one for each Great Plains product. The tests, which they can take when they feel ready, consist of a true-false section on product features and functions, a case study to measure problem-solving aptitudes, and other items. Employees can gain another 5 percent on the basis of their productivity, measured by incoming calls they've taken or thank-you letters they've received. And, finally, they can earn commissions, up to $600 a month, by selling a Great Plains service package.

On the systems side, Great Plains has spent millions on an integrated call-handling system. When customers phone and beep their authorization number, the system identifies them, the computer system they have, and the products they use. Then it routes their calls to an appropriate group of product support specialists. It also allows those specialists to key up a complete six-month history on the customer — the problems they've had before and how they were resolved.

Great Plains often goes the extra mile. The company has on occasion sent its specialists far from Fargo — at its own expense — if that's what it takes to solve a customer's problems. One customer who got hands-on service was the Corman Bag Co., a 20-employee industrial packaging distributor in Chelsea, Massachusetts. After she started using the software last year, Julie Corman wound up facing a multitude of glitches. Among other things, the Great Plains module that generates and tracks purchase orders wasn't meshing with other functions, and Julie, who oversees the books for her family's business, couldn't get the program to enter and record inventory items in the format she wanted. After weeks of trying to straighten it out by telephone, Great Plains dispatched a customer-service rep to Chelsea. The problem was cleared in a day.

The pleasant surprise is that customers are more than willing to pay for this attention. The company offers a series of service packages, ranging in price from $195 to $3,595, which guarantee that any customer inquiry will be answered within an hour. If it isn't, the customer gets a $25 gift certificate. As of mid-May it had fielded 126,000 calls without breaking its promise. So many customers signed up for packages that Boldt's department has become a profit center, accounting for 20 percent of revenues.

Great Plains's reputation for service is beginning to exceed that of its software. Warren Blanding, who heads the Customer Service Institute in Silver Springs, Maryland, places Great Plains in a group of customer service stars that includes L.L. Bean, Abbott Laboratories, and Time-Life Books.

In the process of reviewing accounting packages for InfoWorld, a trade publication, Richard Morochove, a software consultant, went so far as to pose as a customer. He found Great Plains to be "by far the most helpful and friendliest" of the companies he checked. "Aside from their initial helpfulness, they even called back two days later to follow up. At one point," Morochove says, "I wondered if they were slipping something into the water, because everyone seemed so damn cheery."

Although things seem to be going well right now, Great Plains's future is not without its question marks. "If they have an Achilles heel," says Morochove, "it's that they tend to be more conservative than their competitors when it comes to expanding into new markets; they tend to move more slowly in the fast-moving software industry." Competitors question the technical elegance of the company's software. "It hasn't been rated as the easiest software to use," says one.

There's also a question of whether the family can provide enough fuel for the company to keep up its impressive growth. Even though revenues have skyrocketed, financing is tough to come by. It remains to be seen how long a small-town grain elevator company, no matter how successful, can sustain the business without banks, venture capitalists, a corporate sugar daddy, or even Wall Street.

And can a software company based in Fargo really succeed? "Location doesn't have any impact on its ability to market or support a customer," says Mitch Paioff, author of the Accounting Software Guide and a consultant based in San Jose, California. But one competitor wonders if the company can attract the executive talent and depth it will need as it matures.

The biggest question of all has to do with family values. Right now, life is still simple at Great Plains, just as it is in Arthur. What happens as the company gets bigger and more complex, and it gets further removed from the farm?

Will the small-town family values that underlie Great Plains's reputation for customer service become irrelevant? K. Burgum considers the question for a moment. "Never," she concludes. "Caring is always relevant."

Great Plains Software

Product: Accounting software for PCs.

1989 Sales: $22 million.

Ownership: Burgum family owns about 80 percent of the company.

CEO: Douglas Burgum, 34.

Family Involvement: Six members sit on the board.

Major Accomplishment: Family expanded from grain elevator business in North Dakota to successful ownership of a high-technology, knowledge-based company, finding customer service the key to both businesses.

Burgum's guide to customer service

  1. Recruit and hire employees who care about people.
  2. Build superior systems to support your service representatives.
  3. Listen, respond, and listen again to your customers.
  4. Set internal goals higher than customer expectations, and then deliver.
  5. Make sure you really understand what your customers are experiencing.
  6. Give front-line employees the authority to make decisions.
  7. Do it right the first time. (If you don't have time to do it right the first time, you sure don't have time to do it over.)
  8. Invest in training your employees — then invest some more.
  9. Ask frequently for feedback from your customers, vendors, and employees.
  10. Celebrate outstanding employee contributions in providing service.
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Stew Lenard, watch out. The Kowalskis of St. Paul, Minnesota, may steal your crown as the champion of customer service among the nation's grocery markets.

Jim Kowalski and his wife, Mary Anne, bought three groceries in St. Paul during the eighties and turned them into money machines by catering to the specific needs of customers in each store's neighborhood. The Kowalskis serve coffee and cookies to customers waiting in the checkout lines. They regularly invite customers to each store for discussions on how service can be improved that may last two or three hours. (One recent customer suggestion led to the introduction of a sugar-free checkout line to prevent kids from snatching candy and gum for mommy to buy.) Four days a week they rent a bus to help senior citizens do their weekly grocery shopping. In collaboration with the American Indian Center in St. Paul, they distribute vouchers that enable people to buy food and supplies when their money runs low. For the Vietnamese population in one St. Paul suburb, they published a booklet in their language with nutritional guidelines for American foods.

The Kowalskis have won all kinds of awards in the Twin Cities. And if there is any doubt that caring for customers can pay off, listen to this: When they bought their first store in 1983, it had a $50,000-a-week volume, or $2.78 a square foot. According to Tom Peters's newsletter, On Achieving Excellence, that was 60 percent below the industry average. Now the volume is $200,000 a week, 26 percent above the industry average. The three stores employ 480 people, including carloads of Kowalskis. Besides Jim and Mary Anne, there are Jim's brothers, Tom and Bob, their sister, Shelly, and Tom's wife, Debbie. There's Uncle Frank, who's the maintenance supervisor, and Aunt Nettie, who's in charge of catering and prepared foods. The Kowalskis' retired father and mother work for the company part of the summer and winter, when they're not traveling. And Jim and Mary Anne's daughter, Kris, who has a degree in business and economics, is coming back to work there this year.

It would be easy to dismiss the bear-hugging of customers as just smart business. After all, the conventional wisdom of the nineties — which arrived some time ago with the likes of Tom Peters and the publicity lavished on companies like Stew Leonard's Norwalk, Connecticut Food Emporium — says that businesses wishing to survive this highly competitive decade had better get obsessive about customer service. But the Kowalskis don't appear to obsess. They just seem to do what comes naturally — to really care about people.

 

What can a company do to assure consistently good service to customers? Do the owners of family businesses have a head start in knowing what it takes, and in being willing to work harder at it?

Almost two-thirds of the 1,076 members of family businesses who responded to this magazine's survey last fall listed "serving customers well" as one of their three most important business goals. Many experts believe the leaders of family companies have an easier time than heads of other companies in shaping policies to achieve that goal. In their recent book, Total Customer Service: The Ultimate Weapon, William H. Davidow and Bro Uttal write:

"They seem to understand intuitively the importance of service values and how to communicate them. When your name is on the building — or at least on your company's statement of incorporation — you tend to be hypersensitive about the image customers have of the company and to run the company like a family. Employees pay strict attention to your feelings. A surprising number of the firms that produce outstanding customer service were led by their founder, owners, or members of the founding family..."

 

Ron Zemke, a consultant on service quality and author of The Service Edge, generally agrees. Family businesses, he says, are "a little more entrepreneurial, a little less reluctant to take advice from customers." People like Stew Leonard, he says, "know that to survive, they have to listen closely to customers, that they get some of their best ideas from customers. They aren't sullied by a business school education which tells them they are supposed to know everything and no one else knows anything."

But when families in business are not working well together, Zemke says, the impact on customers can be disastrous. Zemke, who heads a firm called Performance Research Associates, once consulted with a family business after the patriarch had died. The matriarch who took over had no respect for the kids and treated employees like serfs who should be eternally grateful for their jobs. Zemke's firm monitored employee phone conversations (with their full knowledge) and discovered they treated customers in much the same way. Their attitude, according to Zemke, was, "We don't have to provide this or that. You should feel privileged to be a customer of this company."

John Ward, a professor at Loyola University who has compiled a large database on family firms around the country, says research shows that family companies are generally perceived to offer better quality service than other kinds of companies. Partly, he says, this is because most are in service industries and their leaders tend to learn lessons about how to treat customers early on and to develop positive policies if they expect to stay in business.

Ward, who is also a consultant to family businesses, says, "My personal experience is that, on average, they have more meaningful value systems that influence their treatment of customers. They do care." But the leader's strong influence can be a double-edged sword. "When he cares about quality, he has the ability to convey it to all his employees," says Ward. "When he doesn't care, that message comes across strongly too. There seem to be wider swings in values in family-owned businesses than in larger, more institutionalized companies."

Some of the older, larger family businesses have institutionalized good service and are right up there in everybody's pantheon of customer-friendly companies. Tom Peters in A Passion for Excellence writes that Roger Milliken, chairman of Milliken & Co., spends 80 percent of his time "wandering around" meeting customers, lecturing at the company's Customer Service Center in Spartanburg, South Carolina, and trying to establish a mind-set in the huge family-owned textile concern that encourages employees to be similarly obsessed with understanding customers' needs.

L.L. Bean, the catalog colossus of Freeport, Maine, has long been famous for its service reps' punctiliousness and near-perfection in filling customer orders. "Sell good merchandise at a reasonable profit, and treat your customers like human beings, and they'll always come back for more," was founder Leon Leonwood Bean's Golden Rule, and it is faithfully followed today in the company led by Bean's grandson, Leon Gorman. Likewise, the public statements of other large enterprises such as Wal-Mart and Levi Strauss — even Ford, which still has family members in management and on its board — often talk about their family values.

The company that probably has the most enviable customer-service policies in America today — and certainly the best publicized — is Nordstrom's of Seattle. Over the past decade, sales at Nordstrom's 60 department and discount stores have grown sixfold to $2.3 billion in 1988, and many attribute that surge to Nordstrom's commitment to paying almost any price in order to satisfy the customer.

One anecdote, related in Total Customer Service tells of a businessman who bought two suits that he wanted to take with him on a trip. When the store failed to alter them in time, he was secretly gratified that Nordstrom's had proved to be less than perfect. When he arrived at his destination, however, he found a Federal Express package waiting in his hotel; in it were the two suits, plus a gift of three $25 ties!

Nordstrom's takes pride in an organization chart that is an inverted pyramid, with the customers at the top, the sales people right under them, the buyers, department managers, store managers, beneath them, and so on. On the bottom is the five-man committee that runs Nordstrom's: brothers John and Jim Nordstrom, grandsons of the founder; their cousin Bruce Nordstrom; a cousin-in-law, John McMillan, and an old family friend, Bob Bender.

The bottoms-up structure is typical of the Nordstroms' approach, which exhorts front-line employees to use their own judgment in dealing with customers and calls on higher ups (or lower downs) to practice humility. When they were young, Mr. John, Mr. Jim, and Mr. Bruce, as they are known in the company, started as stock boys in what was then a chain of shoe stores. "We were raised kneeling in front of the customer," says Bruce Nordstrom. The Nordstroms rely heavily on training to instill their customer-first philosophy, but they also strive to hire people with the right stuff. "When someone asks who trains our employees, we say it's their parents," said one store general manager in an interview last year. "We just hope to find people with good values that are genuinely interested in helping others."

Little hard evidence exists that family-owned or family-controlled companies offer superior service, compared with nonfamily businesses, but one recently completed survey of smaller businesses pinpointed some differences.

Amy Lyman, a lecturer in applied behavioral science at the University of California, Davis, conducted telephone interviews with 78 business owners in Davis, a university town of 43,000 people with only one other major employer, a Beatrice/Hunt-Wesson tomato processing plant. Lyman confined her sample to businesses that sell a product, and most of the respondents were store owners with five or so employees. When she couldn't get the owner on the phone, she talked to the manager. Of the 78 people interviewed, 48 were in family-owned enterprises and 30 in nonfamily enterprises.

Lyman's survey probed both the family values of the business owners and their customer service policies. The questions were sometimes open-ended to elicit comments. Her conclusions support the widespread belief that the personal values of the owner heavily influence customer service in family firms: "As long as family control of the enterprise is maintained, family values will influence business operations."

Family business leaders tended to be longer-term residents of the Davis community: 21 percent had lived within 10 miles of their current address for more than 25 years, compared with only 3 percent of nonfamily leaders. The heads of family firms were much more likely to say that their customer service policies reflected on them personally (51 percent versus 18 percent) and not just on the business. More of them said their policies reflected "the personal family values of my childhood" (96 percent versus 83 percent).

By contrast, when asked about the benefits of their customer service policies, nonfamily owners and managers were much more likely to talk about them only in financial terms. What struck Lyman most was how rarely they mentioned any link between their own values and service to the customer. "They almost seemed to deny any connection," she says.

Almost everyone interviewed said their businesses had customer service policies with which employees were expected to be familiar. But nonfamily firms were more likely to have formal, written policies. More family owners seemed to rely on informal policies that were flexible enough to allow employees' personal feelings to enter the transaction, saying, in effect, "We have rules, but if the rules don't work, then we figure out a way to meet the customer halfway." Indeed, they seemed to feel that a happy customer was one of the rewards of working in the business. Nonfamily owners and managers, on the other hand, put more emphasis on written policies as a means of guiding and controlling employees' behavior.

The most striking finding of this small study was that the majority of family owners tended to trust their employees, while many nonfamily owners did not. A total of 77 percent of family owners disagreed with the statement, "Some of my employees can't be trusted," compared with 47 percent of nonfamily owners. Perhaps the fact that there are written rules in nonfamily firms reflected this distrust.

Most of the new wisdom on customer service seems to stress the importance of giving front-line employees the responsibility and authority to make decisions on such issues as customer returns or requests for repairs. What irks many customers are bland, bureaucratic replies like, "It's against the rules," or, "I'll have to ask my supervisor."

When it comes to returns of merchandise, for example, some companies like Nordstrom's simply replace the item or give the customer a refund, no questions asked. Employees like to quote Jim Nordstrom as saying, "I don't care if they roll a Goodyear tire into the store. If they say they paid $200, give them the $200." The calculation here is that the loss of a customer can be far more costly in the long run than paying the $200.

The frustration of being hemmed in by all sorts of rules and procedures when dealing with customers was clear when Lyman surveyed employee attitudes toward service in the same firms. A typical employee of a nonfamily business reported that she "would love to be able to do things to satisfy the customer, but headquarters says 'No; we have to follow the rules.'"

Conflicts often arise when the manager or employee feels the customer is being dishonest — for example, lying about the condition of the product when he bought it — and yet doesn't want to lose the person's business. Some 36 percent of the respondents in family businesses said they would not compromise their values in such situations, versus 18 percent in nonfamily businesses. One respondent from a family company commented: "When someone has abused something and wants to return it, I wouldn't do that." Another said: "When you can tell the customer is lying, it conflicts with my values. I have told two people not to come back." A third said, simply: "I have thrown some people out of here."

The very values that cause family business owners to treat customers better may, paradoxically, make them more willing to take a stand against unreasonable or dishonest requests. Lyman believes this issue suggests the importance of boundaries in transactions with customers.

"We are seeing Nordstrom-like behavior in other stores," she says. "They install a piano player and coffee bar and say we'll do whatever is necessary to please the customer. At Nordstrom's, there is a family philosophy guiding the policy that acknowledges boundaries and says: 'We will not compromise our values.' It worries me that this is lacking in other businesses. Especially in public companies, employees need rules that say: 'Yes, you should do whatever you can to please, but there are limits."'

While too many rules lead to rigid, bureaucratic responses, lack of a clear idea of what the rules are can also hamstring employees. Lyman suspects that some of the family business owners she talked to "carried around their customer service policies in their heads" and did not spend enough time communicating them to employees.

In larger companies, employers cannot know all their employees and thus whether or not their judgment can be trusted. Written policies inform employees of what is expected of them.

John Ward of Loyola argues that institutionalizing service policies assures the consistency in dealing with customers that is lacking in family firms. "Consistency is not one of the hallmarks of family businesses," he says. "Strong values are, but consistency is not."

Some studies by Benjamin Schneider, an industrial and organizational psychologist at the University of Maryland, College Park, underscore the point. Schneider surveyed employees' perceptions of service policies at bank branches in a populous metropolitan area and in a rural-suburban area of the Northeast. Then he asked customers of the various branches to rate the service they received.

Not surprisingly, when management had clearly defined policies that supported and rewarded employees for quality service, customers reported receiving it. Schneider says that inconsistent management policy undermined service at some banks. "If employees see that the people who are delivering the best service don't get promoted, don't receive the rewards, they become cynical," he says. "Employees in the same facility may be told to treat people with bigger accounts better than people with smaller accounts. They hate to do that. Customers hate it, too. That combination can be a real killer."

Although he did not study family businesses, Schneider thinks that one of their common failings is reliance on good hearted motives and being nice. "You can't only be nice," he cautions. "You have to pay attention to the details required to deliver excellent service." Bill Davidow, coauthor of Total Customer Service, agrees. "Frequently," he says, "family businesses don't keep up with the times, don't become familiar with new technologies. They tend to become overly insular." Yet, the highly systematized, automated approach in such huge firms as American Express doesn't always work in the more high-touch, personalized environment of the family business.

Call it intuition, call it instinct, the caring of families like the Kowalskis counts heavily with customers. Jim Kowalski acknowledges that his company does what it does for customers partly because the independent grocery today has to offer something customers can't get in big supermarket chains. "A can of peas is a can of peas on anybody's shelf," he says. "The difference is how the customers feel about the place while they're buying those peas."

Winning points on service aces

In his book The Service Edge, business consultant Ron Zemke, describes 101 firms that deliver superior service. From his study, he has distilled five principles of distinctive service that these companies share:

 

  • They listen to, understand, and respond — often in unique and creative ways — to the evolving needs and constantly shifting expectations of their customers.

     

     

  • They establish a clear vision of what superior service is, communicate that vision to employees at every level, and ensure that service quality is personally and positively important to everyone in the organization.

     

     

  • They establish concrete standards of service quality and regularly measure themselves against those standards, guarding against the "acceptable-error" mind-set by establishing as their goal 100 percent performance.

     

     

  • They hire good people, train them carefully and extensively so they have the knowledge and skills needed to achieve the service standards, then empower them to work on behalf of customers, whether inside or outside the organization.

     

     

  • They recognize and reward service accomplishments, sometimes individually, sometimes as a group effort, in particular celebrating the successes of employees who go "one step beyond" for their customers.

— H.M.

Keeping an open mind

Experts on customer service seem to agree that front-line sales people should have as much flexibility as possible in dealing with customer requests. In Amy Lyman's survey of 78 businesses in the city of Davis, California, owners and managers were asked a question which was meant to indicate whether each request was weighed on its merits or was judged according to a policy or rule.

A total of 81 percent of family business leaders said that they evaluated each request for service along with the business's ability to provide it, compared with 58 percent of nonfamily business leaders. The comments of both types of owners suggests some of the dilemmas in reacting to such requests:

"If the customer buys something that he didn't really want, we all try to resolve the problem. But the squeaky wheel gets more [attention]. We look to honesty as a guide."

"If we are responsible [for the problem], then we have to make the customer happy. If we're not responsible, we need to explain to the customer why he isn't right."

"If it's not a valid honest request, they'll be challenged. We face a lot of ripoffs."

"It's human nature — the attitude of the customer will affect the response. We will try to work it out, but a belligerent customer may be hard to work with."

"We got all kinds of requests, sometimes for things we don't do. But we will do all kinds of things."

"Each job is different, so you have to help people with what they want."

"Whatever make them happy; procedures don't count."

—H.M.

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