HSM E-briefing Series
on Customer Retention and Loyalty

"HOLDING ONTO YOUR CUSTOMERS"

The HSM Group, Ltd. provides the following information in the hopes that it will help you, our valued clients and friends, in your efforts to build better relationships with your customers.
 

February 2005

Big Lessons from Legendary Service Leaders
by Stephen W. Brown, Ph.D.

Health care is perhaps the most insular industry in the world. Yet, in holding onto its customers, health care has much to gain by overcoming its myopia. Much can be gained from applying best practices from leaders in other industries. Over several months, we will be sharing big lessons gleaned from legendary service leaders like Disney, Southwest Airlines, and Marriott.

Lesson 1: Base decisions on what the customer wants and expects.

            Jim McIngvale is the hands-on owner of America’s largest and most successful single-unit furniture store in Houston. To everyone he interacts with, “Mattress Mac” stresses that Gallery Furniture is in the customer business rather than the furniture business. And McIngvale’s innovative ways of relating to customers and remarkable growth reinforce this philosophy.

            Legendary services businesses have long known that if their customers don’t like the experience provided, value it, and think it meets their needs and expectations, they won’t come back. They know how much value a customer can return to the organization over repeated visits. Leading services organizations also know that if the customer doesn’t like the experience, it doesn’t matter what engineering, production, quality assurance, or anyone else inside the organization says or believes. It all starts with the customer, and it is the customer, not the organization, who defines quality and value. A senior manager at Walt Disney, Bruce Laval, even coined a term to focus everyone’s attention on the study of guest behavior: “guestology.”

            Guestology turns traditional management thinking on its head. Instead of focusing on organizational design, managerial hierarchy, and production systems to maximize organizational efficiency, it forces the organization to look systematically at the customer experience from the customer's or guest's point of view. What customers do and want are first systematically modeled, studied, and predicted. Guestology involves systematically searching for the key factors that determine quality and value in the eyes of the guest, modeling them for study, measuring their impact on the customer experience, testing various strategies that might improve the quality of that experience, and then providing the combination of factors or elements that attracts customers and keeps them coming back. Only after developing this total guest orientation can the rest of the organizational issues be addressed. The goal is to create and sustain an enterprise that can respond to the customer's needs and expectations and, importantly, make a profit.

            From their study of customer preferences, Disney’s guestologists know that an important reason for satisfaction with its theme parks is cleanliness, and clean parks feel safe. Disney therefore stresses keeping the parks clean, and its reputation for tidiness has become one of its greatest assets. Keeping a theme park clean is a big job, so the Disney organization encourages its customers to help out by disposing of their own trash. After all, whatever people throw away themselves does not have to be picked up by a paid employee. In studying customer behavior, Disney learned two things about trash disposal. First, if cast members (the Disney term for park employees) constantly pick up even the smallest bits of trash, park visitors tend to dispose of their own trash, rather than throw it on the ground. The cast members practice and respect cleanliness, and so they become role models for customers to emulate. Second, most people will throw their own trash away if trashcans are convenient, easily seen, and not very far apart. Disney locates its trashcans to match those criteria. Go inside the Magic Kingdom or Disneyland on a quiet day—when the crowds are not distracting—and Main Street looks like a forest of trashcans, located 25 to 27 paces apart. Understanding how customers respond to environmental cues, and using that knowledge to help maintain a high standard of cleanliness, is guestology in practice.

            The lesson here is that all businesses should spend considerable effort in understanding, in as scientific a way as possible, the behaviors, wants, and needs of their customers. The results can then be used to identify the key drivers that determine customer purchase and repurchase decisions. As a true believer in focusing on key drivers, Disney surveys its customers constantly. On one such survey, Disney World visitors were asked about their overall satisfaction and how their experiences related to their intention to return to the park. The quality of fast food in the parks and the park transportation system received relatively low ratings. However, further analysis of the data revealed only a weak statistical relationship between these low ratings and both intention to return and overall satisfaction with Walt Disney World. On the other hand, ratings of hours of operation and fireworks were strongly related to both the return intention and the satisfaction measure.

            Guided by the survey results, Disney invested available funds in extending park hours and expanding the fireworks displays. Although the organization knew it could improve the fast food and the transportation system, it allocated scarce resources to improving areas of key importance to customers. Disney's strategic planning process does not just involve their top managers introspectively reviewing extensive internal reports about the organization’s core competencies. Instead, Disney starts with its customers and incorporates their wishes and expectations into strategic decisions. All legendary services organizations do the same. They find out what key factors drive the satisfaction of organizational customers, and they work hard to ensure that they have or develop the core competencies to provide and enhance those key drivers. This again is guestology in practice.

            Southwest Airlines provides a second excellent example of guestology in practice. SWA is the only North American airline to be profitable for thirty-two years running. Like many organizations, Southwest uses customer surveys to identify what customers want. Multiple survey results have revealed that customers want cheap fares, on time performance, great meals, comfortable seats, free movies, and more. Southwest quickly recognized that, if you ask people what they want, they’ll tell you they want everything. Southwest knew it couldn't give its customers everything. Gourmet meals with wine in big comfortable seats and low fares—the economics don’t work. So Southwest dug deeper into customer preferences and learned that their customers especially wanted low fares and reliable schedules with friendly service.  And, by avoiding having to extensively clean up after each flight, Southwest is able to turn its airplanes around quickly between arrival and departures saving itself money and providing customers with lower fares.

            All health care organizations committed to success can learn from Southwest and Disney. They study their customers extensively to discover what the customer both wants and values in the service experience and use this information to align all the elements of their corporate strategy with customer expectations. These organizations can identify and act upon the key drivers of customer satisfaction. Customers also tell the organization whether its core competencies are properly aligned with customer value and satisfaction.

            "It all starts with the customer" is not just an inspirational slogan for these benchmark service leaders. If the business goal is to provide an exceptional customer experience, then the organization must completely understand all the reasons that their customers seek to do business with the organization, how they behave in their purchase relationship with the organization, what they expect from both the product and the experience, and how to meet the customers’ expectations.  

To discuss how HSM can help your organization better understand what your customers want, call Jim Hendrix, Vice President of Research and Economics, at 800-776-8078, ext. 310

*Dr. Brown holds an endowed chair, is a business professor, and serves as executive director of the Center for Services Leadership at Arizona State University’s W.P. Carey School of Business. He is also a co-founder and senior advisor of The HSM Group. These lessons are updates from the article “Delivering Excellent Service” co-authored by Dr. Brown, Robert C. Ford, and Cherrill P. Heaton in the California Management Review.

Big Lessons From Legendary Service Providers
Lesson 1  |  Lesson 2  |  Lesson 3  |  Lesson 4  |  Lesson 5

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