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.
 

March 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 2: Think and act in terms of the entire customer experience.

Service leaders carefully study all three parts of the customer experience: the service or product itself, the setting, and the delivery system – the what, where, and how. Looking at how their product/service is provided, these organizations know that the delivery system is crucial in ensuring that all customers are provided with the experience they expect. Providing a good hamburger or clean hospital room is not enough. Careful attention must be paid to the process by which the hamburger is prepared and delivered to the customer and the setting within which it all happens. If the delivery system isn’t in place, then Southwest Airline’s planes don’t leave on time, baggage is lost, and arrivals are delayed. The term “moment of truth” is relevant to all firms in describing the importance of every contact or encounter the customer has with the organization. The idea is so important that leading companies have developed techniques for determining what problems can occur at these moments of truth, finding ways to fix them before the customer experiences a service failure, and where needed, recovering from the failures that inevitably occur in even the best organizations.

Horst Schulze, the legendary founder and former leader of the Ritz-Carlton Hotels, tells the story of how a manager identified and solved the service delivery system problem of room-service breakfasts arriving late. After receiving guest complaints about their breakfasts being brought to the rooms both slowly and cold, the manager investigated. The traditional managerial solution to the problem would have been to call in the offending room-service manager and criticize that person for technical incompetence and poor supervisory skills, along with whatever other comments might seem appropriate to dressing down the offending manager. Then the properly disciplined manager would return to the kitchen, gather the room-service people around, and yell at them. After all, in most organizations, blame rolls downhill to the lowest level employee.

Schulze likes the example because it lets him illustrate an approach to problem-solving particularly useful in a delivery system so reliant on its people. The room-service manager organized a team of his employees and asked them to study the problem, find out why the meals were not getting to guests within a reasonable time, and suggest ways to solve whatever problem they found. The team studied the problem and soon found that the cause was the slowness of the elevators needed by the room-service people to get the meals quickly to guests. They even had a room-service employee spend an entire morning in an elevator with a stopwatch to see where the elevators were, what they were being used for, and why they weren't available when the room-service people needed them.

What they found astonished Schulze and the manager. The whole problem could be traced to a faulty management decision about how many bedsheets each floor was allowed to stock for the housekeepers. The stocking decision had left some floors with too few sheets, and the housekeepers were often using the elevators to hunt for extra sheets to finish cleaning the rooms on their floors. The elevators were therefore unavailable to the room-service delivery people when they needed them, cold meals intended to be hot were delivered late, and the hotel guests got angry. Because a manager trying to save on the cost of sheets had stocked too few, the rest of the system was disrupted. This cost-saving move drove up the overall costs of room service (because the hotel did not charge for meals when guests complained) and housekeeping labor (because housekeepers were spending their time in elevators instead of making beds). Trying to save money in one part of the service-delivery system created problems for another part. The total impact was to drive up costs and increase customer dissatisfaction. What manager would ever have thought to solve the late-breakfast problem by adding more bedsheets to the available supply on each floor? And simply putting out one small fire ("We are spending too much money on sheets") without thinking that one small decision can cause big problems elsewhere.

In another example of looking at the how instead of the just the what of the service experience, Marriott's managers discovered a solution to an unexpected problem. When the new budget for a hotel was proposed, they initially thought that some available funds should be spent on small television sets for bathrooms. When confronted with a systematic study of the entire customer experience at the hotel, however, they also learned guests frequently requested ironing boards and complained when they were not available. Furthermore, the housekeeping staff was spending a lot of time delivering the short supply of ironing boards. Based on a systematic study of the data, the housekeeping department was able to show that the funds proposed for television sets should be spent for ironing boards.

A final illustration of the importance of the how in the customer experience is provided by studying, understanding, and managing occasions when customers have to wait. Often a service experience involves a wait somewhere. Whether it is waiting to see a physician or waiting for a delivery of a meal at a restaurant, there is a wait to be managed. Benchmark service organizations study every step in the customer experience looking for the times when a customer is waiting for some or all of the experience to take place. They study customer psychology to determine what makes the wait feel longer, shorter, or just right. They also study the mathematics of the queue to ensure that customers get whatever they expect in a timely fashion. While many organizations have spent considerable time studying the reactions of their customers to waiting, how to manage the wait is a largely understudied area in most organizations.

Disney is the master of managing waits at its parks. They know the exact relationship between guest satisfaction and wait times and make sure they have sufficient attraction, food service, and merchandise capacity available to handle the number of guests in the parks. They also send mobile entertainment teams to especially long lines at a particular attraction to entertain the people in line, post times of wait, and offer a virtual wait capability (the “fastpass”) that allows people to make a reservation for a particular attraction so they can go elsewhere while waiting for their designated time.

Typically, there is more to an experience than merely a product. The legendary service leaders pay attention to the complete experience that customers have, from the moment they become a customer until the time they leave. The more customer-focused manufacturing organizations have also learned this lesson. When someone becomes a Harley-Davidson customer, for example, they buy into a brand experience and a way of life. Harley managers and dealers often refer to their business as “fulfilling dreams through the experience of motorcycling.” An illustration of the company’s appreciation of the total customer experience is its successful sponsorship of the Harley Owners Group or HOG, the world’s largest owner affinity group with more than 500,000 members.

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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