Art of Retail Management
From these dealers we learn: (1) there's more than one way to provide great customer service; and (2) an exceptional service can be a sustainable competitive advantage. "Competitive advantage" simply means that customers generally favor one dealer over another. A sustainable advantage is when customers prefer a dealer for the long-term-and almost always it is for reasons other than price. The loyal customers resist the lure of a competitor's low price. The only offense that beats great customer service is even greater service.
After he unexpectedly found himself in the flooring business, Marty Downen of Valencia, Calif. also designed his own approach to providing great customer service. While he took over the business just three years ago, he was not new to the floor covering industry. He had grown up in his father's business, stripping out old floors and laying pad for installers. Much like Mr. Miyagi telling the Karate Kid "wax on, wax off," his dad taught him self-discipline through work.
As a teenager, Marty was a standout pitcher with a vicious fastball. After playing college ball at BYU, he signed with the Kansas City Royals and played two seasons in the minors. But tragically, just when it looked like he was about to go to the majors, he learned his mother was terminally ill. He took a leave of absence to care for her and never returned to baseball. Instead, three days after his mom died, his dad handed him the keys to his flooring business-and retired. Marty was on his own.
Undaunted, he ran the store and managed to increase business. But, sadly there was another tragic set-back: A head-on car crash. Marty survived but required about four years of painful physical re-habilitation. Three years ago, he opened a new flooring store, Marty's Floor Covering. It too has grown- by $1million each year-and now generates nearly $3 million in sales.
I asked Marty what helped him succeed. He said the first step was a location that promised growth; someplace where he could attract a mixture of retailers, builders, and main-street-contract customers. (The area he picked is a business park that costs less than prime retail space.) Then, because he saw referrals as the best way to build a customer base, he reached out to real estate agents and small building contractors. He built relationships based on trust. He also asked customers how they heard about him and what brought them in. The information helped him calculate the ROI on his ad-dollars. It enabled him to advertise with confidence. (FYI: He says local cable TV and Yellow Pages yield the best returns.)
The ads may be important but Marty figures that 70 percent of the business is from referrals. The local real-estate people and the contractors he befriended refer people all the time, but other customers refer even more. He credits this high referral-rate to his systematic approach to customer service.
In the early 1990's, management experts Michael Treacy and Fred Wiersema developed a model for analyzing and measuring company strategies. (See "Three Paths to Market Leadership", Harvard Business Review, Jan-Feb 1993; and their book, The Discipline of Market Leaders, Addison-Wesley, 1995). They divided business strategies into three arenas: operational excellence (efficiency and effectiveness), product leadership (differentiation), and customer intimacy (customization). The authors found that market-leading companies were good in the first two areas and clearly outclassed competitors in the third.
Marty's customer-service process applies all three. He has systemized his customer service to ensure that it operates effectively for every customer. He has differentiated his company by doing what his competitors don't do. Leveraging these two strategies, he can focus on a customers' individual needs. Thus, customer intimacy drives his growth. (I recommend customer-intimacy strategy to dealers, because it offers the most opportunities for distinction in a market.)
To understand how it works here is an overview of Marty's installation process - systemized, differentiated, and customer-intimate:
- All installation-subcontractors must have a California Contractor's License. Further, he often reminds them: "I don't pay your wages. The customer does. Treat her well, and you'll get more work from us."
- The salespeople are responsible for educating customers about installation. (He says an educated customer is a happy customer.) This way they know what to expect. (See accompanying story.)
- The day before installation, Marty calls the customer to review the Installation Agreement. The customer knows what the installer expects to find at the job site the next day.
- That day, as the installers load their truck, Marty calls the customer again, to tell her when they'll likely arrive. These calculated communications eliminate the majority of customer frustrations. It's the unmet expectations that frustrate most customers.
- Yet again, during the installation, he calls the customer to make sure it's going as expected. He says the more he talks with customers, the more trust they allot him.
- At the end of the installation, Marty goes to the house and conducts a "walk through" with his customer. He reiterates how the customer should care for the new floor and offers detailed instruction about maintaining and protecting new floors.
- He gives the customer a complementary bottle of an appropriate cleaner and a package of floor protectors to guard against marks from chairs and furniture when he collects the final payment for the work. (Marty's installers know the process and carry it out in his behalf if he can't make it.)
- Within 48 hours after the crew leaves, the salesperson sends a "thank you" note. Customers feel "WOW"ed by all this papering. Marty affirms that such attention-to-detail clearly differentiates him.
You'd think that would suffice to establish customers for life. But, Marty's not done yet. He adds two more steps. About two weeks after the installation, the customer receives another "thank you" note ... along with two free movie tickets. (Marty buys 500 tickets at a time, and gets a 33 percent discount.) There is even a message stamped on the back of the ticket that says: "To show our thanks - Marty's Floors."
I wondered how he can afford the cost of these extras. He confides that he builds the cost into his prices. With his reputation, Marty often wins the sale against a competitor's lower bid.
Thus, we see that there are many ways to skin the proverbial cat. Good businesses develop great customer service in different ways, but all dealers please customers the same way - Customer service that goes beyond expectations. What percent of your sales come from new, referred customers? What if your percentage rose to 70 percent? Might you, too, increase your sales by one-million dollars a year?
‘We just want to go over a few things...'Flooring retailer Marty Downen says that because of his pin point focus on customer service, 70 percent of his business comes from referrals. No where is the effort more apparent than in the installation process. But he notes the process goes well beyond staff that is friendly and courteous. His staff has also been trained to teach consumers about their new floor. The steps in the installation process include these:
- During the sales process, salespeople ask customers, in effect, "What are you hiring this carpet to do?" They listen to the answers. This helps them steer the customer to the right product for their needs.
- Salespeople let customers know what to expect from their particular floor covering-its strengths and limitations and how it will perform day in day out.
- When the customer decides on a floor covering, the salesperson explains the proper maintenance and ways to protect the floor.
- The entire installation process is explained to the customer (usually by Marty himself). This includes the customer's responsibilities and the specific tasks that will be handled by the store's staff.
- The customer and the salesperson each sign an "Installation Agreement " that specifies their respective responsibilities as well as all costs. The agreement and the procedures leading up to it help to avoid disputes.