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Nuts to You!
How Southwest Airlines Creates Loyal Customers

Its philosophy of customer service could be summed up as "Nuts to you!"

It stays profitable by "living like we're poor."

How does Southwest Airlines engender fanatically loyal customers who regularly write letters to CEO Herb Kelleher to say "Wow! I'm impressed!"?

By putting its employees first, according to Kathy Pettit, director of customers. By making them feel appreciated and valued. "We thank our employees all the time for their contributions and their hard work." Example: Each employee gets a birthday card from Herb Kelleher on his or her birthday. "To the employee, the card doesn't just say 'happy birthday,' it says, 'You're important to us,'" Pettit said.

Celebrating little things is a big deal at Southwest. But some businesses - like health care - say they're too busy to take time for fun. "Hm-mph," Pettit demurs politely. "You find the time if it's important."

Southwest is the only airline to be continuously profitable since 1973. Its stock price increased 300 percent from 1990 through 1995. Its annual employee turnover is seven percent - unheard of with a youthful workforce, much less the airline industry. Employees are motivated to keep the company profitable because they gain too: 15 percent of Southwest's pretax operating income is invested in profit-sharing, and 25 percent of each employee's account is invested in Southwest stock. One tenth of the company is owned by employees.

One of the ways the company stays profitable, Pettit says, is by "always living like we're poor." Any passenger who has been served a Southwest dinner entree on a longer flight - a bag of peanuts - would agree, but don't employees complain?

"We're not cheap," she explains. "Being cheap and managing costs are different." The education pays off: every month, 20 or 30 letters arrive from employees with suggestions for ways the company can save a dollar. Every letter gets an answer from Herb.

Putting employees first as does Southwest Airlines doesn't mean that customers come second. The fact is that when employees know they are valued by their company, they value their customers. How do you create loyal customers? Just ask a Southwest Airlines employee. If you don't get around to it today, that's okay - there's a 93% chance the same employee will be around tomorrow - or next year, serving Southwest's fanatically loyal customers.

Excerpted from Loyalty Line Newsletter, January 1997.

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