Customers for Life
Carl Sewell took over his family company when it was last in its market and beleaguered by angry customers. How he turned the company around — increasing sales tenfold — provides the most basic of business lessons: treat every customer as if you were trying to sign him on for life.
There was never any doubt that Carl Sewell would take over his family's car dealership in Dallas. But the timing came as a shock. Sewell's father died just two years after Carl joined the business.
That was unsettling enough, but what Sewell — then 26 — found, as he went into the office after the funeral, was even worse. In 1967, there were only three Cadillac dealers in Dallas, and Sewell Village Cadillac was a distant third in both sales and profits.
Something would have to change at the $10 million company. But what?
"At first, I thought we could be cheaper than everybody else, but that's not really what most people want," he says. "Besides, we can't compete solely on price. No matter what we charge, somebody can always charge $1 less."
So Sewell began thinking about his company from his customers' point of view. "I realized that most people didn't like doing business with car dealers," he says. "They looked forward to seeing us about as much as they did going to the dentist."
Sewell started asking customers what they didn't like about car dealers, and they told him, without mincing words.
They found the service hours — usually 8 to 5 Monday through Friday — inconvenient; they thought many of the employees were rude; they hated being without a car while it was in the shop; and worst of all, they often had to bring their car back to get a repair done right. "They were telling us what was important. They were defining service quality."
Sewell started by giving customers a free car to use while he worked on theirs. Today the loaner fleet numbers 281. Customers wanted him to extend his service hours. He now opens at 7:30 a.m., closes the service department at 8 p.m., and keeps it open all day Saturday.
"Some of what they asked for was a lot more difficult," he explains. "How could we eliminate every potential problem they might have in dealing with us? We needed to create systems that would take care of all that. But how?"
The answer led Sewell on a journey that hasn't ended some 23 years later. But if you ever wanted proof that, as Apple Computer founder Steve Jobs says, "the journey is the reward," take a look at what Sewell has achieved. He now owns five dealerships, sells 10 different lines of cars, and has increased sales to better than $200 million a year.
Sewell accomplished that by providing better customer service than his competitors. By service, he means more than that his employees are polite and willing to go out of their way for a customer. Rather his approach to service represents a systematic business strategy, one that Sewell wanted to explain to his children — Jacquelin, 10, and Carl Jr., 6 — should they choose to be the third generation to run the business.
We don't assume anything. We don't have any rules that say all customers must be greeted in 30 seconds. Rules like that are created by people who assume they know what customers want. Instead, we find out. Give customers a chance to talk and they'll tell you what's important to them.
When a customer gets to the cashier window, he or she is asked to answer three questions on a form:
- Are the charges (less than), (the same as), (more than) the final estimate?
- Was your automobile ready when promised?
- Is this the second time for the same repair?
Those three questions get to the heart of every service transaction, and with a little modification they could be asked by almost every business. In evaluating an ad agency, for example, the questions might be: 1. Was the campaign within budget? 2. Did it come in on time? 3. Did it work? The secret — no matter what you are selling — is to identify the three things that are most important to the customer and measure your performance.
If customers tell us we haven't done a good job, we have a chance to apologize on the spot. If the bill was higher, or the car wasn't ready, the cashier summons a manager who apologizes and arranges to have the work redone. However, most of the time we do a pretty good job, and the form lets us remind customers of that — without bragging.
At the end of the questionaire, we say that we've been around since 1911. We are proud of our history, and of the company my father started, and maybe, when people see that we've been in business so long, they'll think: 'That means they'll probably be here if I have a problem."
Customers can also give us their opinions by filling in a 49-question customer service survey that we include in the folder that contains their bill. The surveys are strictly optional. About 35 percent of our customers complete it.
Focus groups are also a good customer service tool. One or another of the management staff gets 10 or 12 people in a room, and we ask them what they see as our strengths and weaknesses. After that, we focus on a special area such as sales. Did they feel comfortable talking with us? Did their salesperson call back within two weeks to make sure the purchase was okay?
If the customer asks if you can do something for him, the answer is always yes. For us to be successful, we have to convince you that there is something more valuable than money. After all, we're not the cheapest, so to be successful, we must offer you something else. That something is convenience. We remove hassles. We make your life easier.
Any time a customer asks if it's possible for us to do something, the answer is yes. If you lock yourself out of the car, or you get a flat, and you call up and ask if we can help, we're going to say, "sure thing."
We're probably not going to paint your house or wash your windows. We sell automobiles. However, if the request relates to our business, we're going to try to do it.
When we talk to people about this way of doing business, they look at us funny. They say when we're extending ourselves, we're not doing our "regular" job. But of course we are. Our job is take care of the customer so well that he keeps coming back to us for the rest of his life.
Say you arrived at the airport late at night, and the key broke off in the lock when you tried to open the door. Your wife wasn't home. You'd be stuck. Now imagine if you called us and we immediately sent a truck out, and the technician made a key for you, said thank you for remembering us, and then drove away without taking any money. You'd think we were pretty good guys.
Do we ever charge for doing all this? Generally not. Our rule of thumb: Is this something a friend would charge for? If you locked yourself out of your car, and you called a friend, would he charge you for running over a key? No. Well, we won't either.
Let's talk about why this makes economic sense. Suppose it costs us $25 to go over and let that customer into his car. Think about the cost of a radio ad. In Dallas, during peak times, a 60-second commercial on a popular station costs $700. For the $25 we spent letting you into your car, I probably have a customer for life. How many customers for life am I going to get from a $700 radio ad? I'd need 28 — $700 divided by 28 equals $25 — to get the same results from the ad. Common sense tells me we're not going to get 28 customers for life from one radio commercial.
Now, is everything free? Of course not. If we have to go out and install a battery and an alternator, we're going to charge you normal rates, plus the call. But if it's something unusual, like breaking off a key, we won't charge. We'll just help.
If it's for a customer, there Is no such thing as "after hours." Customer service is a 24-hours-a-day deal. It has to be. First off, customers will, upon occasion, ask you to do something after 5 p.m. or on a Sunday. And if the rule is: "When the customer says, 'can you,' the answer is always yes," it has to be yes then, too.
But there's a more basic reason why there's no such thing as after hours. How can we be giving customers the best service if we're forcing them to conform to our schedule? By definition, that has to be inconvenient for them sometimes. We have to work when they want us to, not when we want to.
So that's what we do. We're happy to deliver cars (complete with bows on them, if desired) to people's homes on birthdays, anniversaries and Christmas Eve — even on a Sunday or holiday. We'll be happy to meet someone here at the dealership on Sunday morning, and give them a private showing, and if they want to show up in their pajamas, that's fine with us. Someone needs to come in at 9 o'clock at night, and we close at 8? No problem. We'll wait.
As a rule, all of our salesmen, and service advisors, give out their home telephone numbers to customers. If you lose the number or don't have it with you, it's no big deal. All you have to do is call the dealership. A police officer who's there after we've locked up for the night will arrange to have the right person take care of you.
Build in a cushion so that you always charge your customers at least $1 less than your estimate. By city ordinance, we are required to give customers a guaranteed estimate of what we will charge them to fix their car. There is a tendency on the part of the service advisor to make the estimate as low as possible. He's afraid we'll lose the business if the customer thinks the quote is too high and decides to shop around.
But we don't want our service advisors to worry about that. In fact, we ask them to build at least a 10 percent cushion into every estimate. That way we can ensure the final bill will always be less than what we quoted. At the very worst, we are always, always, always at least $1 less than the estimate. The result? Happy customers.
Here's how it works. If you bring in your car for a repair that we think will cost $85, our estimate will be $100. That way when you come to pick up your car, and find out you only have to pay $85, you're really happy. We don't rip people off. If it's an $85 job, we'll charge $85, even though when we quoted $100, the customer didn't complain.
The nice thing about this approach is that we build in a safety factor, in case the job costs a little more than we thought. It also allows us to do a little bit extra for the customer, without charging him. Say we find that the windshield wipers needed replacing. That normally runs about $7. Well, we can replace them, and still give the customer back his car with a bill that will be less than the price we quoted. Now the customer has a strong sense that he has received additional value for his money.
The risk is that there are some folks who will think the initial $100 estimate is too high, and they'll take their business elsewhere. But that may be 1 or 2 percent of the people. And if they really feel that way, then we're not the folks they should be doing business with.
Smiles are nice, but the real challenge is in designing systems that allow you to do the job right the first time. When people think of customer service, it's usually the warm fuzzy things that come to mind: saying please and thank you, yes ma'am and no sir, calling another store to see if they have the item in stock.
That's part of providing good service but it's only a small part.
Doing a good job has two parts: first, doing the job right the first time; and second, having a plan to deal with things when they go wrong. It's like going to a restaurant: The staff can smile till their jaws ache and hold your chair for you when you sit down, but if the food is not good, you're not likely to go back. What's needed in restaurants, department stores, car dealerships, and everywhere else are systems that guarantee good service, not just smiles.
McDonald's provides the best example of this approach to customer service. When McDonald's began their quest to serve the perfect french fry every time in every store, there were no national standards for potatoes. The U.S. Department of Agriculture didn't have a grading system which said this is a good potato, that one's better, and the one over there is awful. In addition, no one knew exactly how hot the grease should be, or how you could guarantee that temperature would remain constant during cooking or how the potatoes should be stored to keep them from spoiling.
By the time McDonald's finished, they knew what kind of soil the potatoes should be grown in to achieve the consistency they wanted. They even created their own frying equipment to help ensure that the potatoes were cooked the same way every time.
To me this story exemplifies customer service. By devoting all that attention to potatoes, McDonald's has virtually guaranteed that the fries they serve you will be good every time because they've eliminated almost every variable that could cause them to be less than perfect.
All over the country the best service people have started thinking about systems. Take inventory management. The idea behind it is pretty basic: If you don't have in stock what the customer wants, you can't give it to him. And if you can't give the customer what he wants, you haven't provided good service.
Wal-Mart provides great service; it also has the best inventory system of any retailer anywhere. Every item in the store is barcoded, and as it's sold, that fact is recorded at the check-out counter. At the end of the day, the data from all Wal-Mart registers is sent not only to Wal-Mart warehouses, but also to the company's suppliers. That way, if the store is running low on something, the manufacturer can ship it out the next day. Do you know who explained Wal-Mart's inventory system to me? David Glass, Wal-Mart's president.
That's the importance Wal-Mart attaches to inventory systems — which really are another form of customer service. The company president is involved in creating them and making sure they work.
Fire all your quality control inspectors. Inspectors make people sloppy. If you know someone is checking your work, you might not check it yourself. We learned that lesson the hard way.
After going for years without having quality inspectors, and getting Customer Satisfaction Index (CSI) scores in the nineties, we decided that the best way to ensure 100 percent quality was to do 100 percent inspection. That way we would be able to catch the few problems that were getting by.
So, we hired seven inspectors. And you know what happened? Our CSI, and our quality, went down. Because we had all those inspectors, our technicians stopped feeling as responsible for their work. They felt it wasn't their job any more to make sure the job they did was absolutely right. That's what the inspectors were for, they said.
The moment we took away all those inspectors, our CSI went up and so did the quality of the work. It's now the best it's ever been because our people feel more responsible for their work.
If a customer brings the car back, whoever did the job initially is going to do it over again without being paid for repairing it again. That's only fair because "comebacks" hurt not only the customerwho is inconvenienced-but the company.
Each comeback is talked about in our morning quality meeting, and the technician's manager discusses it with him as well. So the technician will know the job came back, we will know it came back, and we will know why it came back.
Now, no matter what we do, and no matter bow diligent everyone is, there will be comebacks. But instead of simply shrugging our shoulders and saying, "mistakes will happen," we keep track of what work has to be redone and we try to fix whatever problems there were in our systems that allowed the problem to slip through.
While you're at it, also fire your customer service department. As long as you're getting rid of your inspectors, you might as well fire your customer service representatives, too. Customer service is too important to be left to a separate department.
Everybody should be a customer service rep. That's how the customer sees it anyway. Customers judge the service they receive by how well they're treated by everybody they come in contact with. If the cashier is rude, or the salesperson isn't helpful, the customer thinks he has gotten terrible service, no matter how helpful the people in the customer service department might be. And he's right.
The number one priority at our dealerships is customer satisfaction. If you don't make the customer happy, you won't work here for long. You can be the best salesperson, or the most productive technician, but if your CSI is not good, you are history.
Do it right the first time. Leonard L. Berry, the director of the Center for Retailing Studies at Texas A & M, has concluded from his studies of customer service that there is nothing more important to the customer than "keeping the service promise."
"Customers want service organizations to look good, be responsive, be reassuring, be empathetic, and most of all — be reliable," he says. "Customers want firms to do what they say they are going to do."
Think about People Express. The idea behind the company was great. They would fly you for cut-rate fares as low as $19 in some cases. But People Express eventually failed, and the reason is simple. The company didn't keep its word. The planes were constantly late, and you never knew for sure whether they were actually going to take off at all. People Express didn't keep its service promise to the public.
The best system in the world for providing customer service is also the simplest: Do what you say you are going to do, and do it right the first time.
Too often when people talk about customer service, they explain what to do after someone screws up. How you make amends for doing something wrong is important, of course, but if you do the job right initially, you don't have anything to apologize for.
That's important. We discovered that if we just respond to problems, our quality suffers. To find out what caused the problem in the first place, we analyze the situation and correct the process once and for all.
When something goes wrong, fix it quickly and cheerfully. Tell every employee: If a customer has a problem, solve it. If you can't solve it, get your manager. If he can't solve it, give it to the CEO, but get the problem solved immediately.
What happens when something goes wrong?
First, we apologize. Then, we fix the problem. Immediately. Over the last 20 years, I've found those are the two keys to handling complaints.
First the apology. We make a big deal out of being wrong. The problem — no matter what it is — is a very big deal to the customer.
Let's suppose for a minute that we bad a chain of blue jeans stores. We might be selling 1,000 pairs a day, and know the odds say that 4 out of those 1,000 will be defective somehow. That means every day when we come to work we know, on average, there will be four problems. After a while we might start telling ourselves, "Hey, we are doing pretty well. For every 1,000 we sell, 996 are fine."
The occasional defect may not seem like such a big deal to us. But it is to the customer. He's not buying 1,000 pairs of jeans, or 100 or even 10. He's buying one. And he doesn't want to hear, "well, these things are to be expected," when he brings the defective one back. As far as he's concerned, we've screwed up 100 percent of the time — he bought one pair of jeans and that one pair was defective.
We must let him know that we sincerely regret making the mistake. Normally a spoken apology will be enough. But if it's a bigger deal, we might write a note, or call, or even — if the problem warrants it — send a dozen roses.
The customer has to recognize that we're sincere. We don't have a pre-printed apology form that we send out when something goes wrong. That's just about as bad as doing nothing at all. But just apologizing isn't enough.
Immediately after we say we're sorry, we take the car into the shop, where it gets worked on first. no matter how many other automobiles we have waiting. And the technician who worked on the car initially will be the one who makes the repair. But before he goes to work, his supervisors will talk to him. The fault may not lie with the technician. The service advisor might have given him the wrong instructions, or the part he installed may have failed after the customer got the car home. But no matter what caused the problem, everyone is going to make sure that he feels comfortable with what he's about to do.
We make a big deal out of our mistakes. And by making a big deal out of them — talking to the technician, the service advisor, and the shop managers — we get the message across that we want to do the job right the first time.
If a customer asks for something you don't have, try to get it. As we said earlier, one of the best ways of providing service is to ask the customer what he wants, and then give it to him. But how can you give the customer what he wants, if you don't have it?
You can't. And that gets us to the importance of inventory, and a system for handling it.
One way to ensure the customer is never disappointed is to have a huge inventory always on hand. That's an option, of course, but a very expensive one. A better way is to have a system that analyzes your inventory and lets you know what you should have in stock, and what you shouldn't.
For example, here's how we track new car inventory. We want 45 days worth of cars on the ground, and that's a number that's been steadily shrinking as prices of cars have climbed.
We balance our inventory across all models — we want 45 days' supply of Coupe de Villes, 45 days of Fleetwoods, and so on. Looking at sales by specific product line (El Dorado), as opposed to total sales (all Cadillacs) allows us to reorder the best sellers, even if total sales are slow.
We also track our inventory by age. If a car has been sitting on the lot for more than 45 days, there's a reason it hasn't sold. There's probably something wrong with it. It may be an unpopular color, or it's dirty and parked in the corner. It's just as important to find out why something isn't selling as why it is.
But the most important thing we measure is availability, i.e. how often do we have in stock what the customer wants? If a customer asks for something we don't have, we record his request as a lost sale. We track lost sales closely. It helps us figure out what to order. Too often, store buyers tend to rely on instinct, and instinct alone is not enough. You need to know exactly what the customer wants.
How much inventory we have on hand is determined by how fast the item sells, how long it takes to restock it, and interest-carrying costs.
To figure out how long date-sensitive inventory has been sitting on the shelf, we use color-coded tags. Every piece of merchandise is tagged, and the color of the tag tells us how long we've had a part sitting around. A blue tag means the part came in January, red, February.
If you're in a retail business, like clothing, where people see your inventory because it's out on the floor, you can be more subtle. A triangle on the price tag could mean the merchandise arrived in March. A square could indicate it came in April.
One way to expand your inventory for free is to establish trading relationships with similar businesses. Say you run a woman's clothing store. You should be able to trade with other nearby stores to get things your customers want. The ability to swap merchandise lets you expand your available inventory, without actually having to carry it.
Systematic approaches are 80 percent of customer service. The key is to devise systems that allow you to give the customer what he wants every time.
Adapted from the book, Customers for Life by Carl Sewell & Paul B. Brown. Copyright �(c) 1990 by Carl Sewell. Published by Doubleday/Currency. Brown is a senior writer at Inc.