John Tschohl, called the “guru of customer service,” by USA Today, Time and Entrepreneur magazines, is a best-selling author, service strategist and president of Service Quality Institute. John is a regular contributor to the Desk.com Blog Expert Corner series.
“Satisfied, loyal, repeat customers are the heart of Wal-Mart’s spectacular profit margins,” Wal-Mart founder Sam Walton once said. “Customers are more loyal to us because our associates treat them better than salespeople in other stores do.”
The presidents and CEOs of all businesses, including the current leadership at Wal-Mart, would do well to heed this advice.
Why? I tend to believe that better customer service and motivated employees who feel wanted and appreciated are the reasons businesses succeed and thrive. Wal-Mart had focused on developing and maintaining a corps of friendly, motivated associates who understand that the customer is boss and act like it. In turn, Wal-Mart has been dramatically more successful at increasing sales than K-Mart, its main rival for many years.
I have been tracking both Wal-Mart and K-Mart for more than 25 years. The hard numbers prove without a doubt the power of a service strategy based on a foundation of employees who feel appreciated. In fact, during the last few years as Wal-Mart has forgotten its service strategy, the company has seen a dramatic reduction in value (by more than $90 billion) and a loss of brand.
Where employees and customers are king
One of the ways toward better customer service is to make sure that employees feel valued, loved and appreciated. If you expect an employee to treat the customer like royalty, you must treat the employee like royalty. Neither Wal-Mart nor K-Mart pays their employees more money than the other, but Wal-Mart communicates to its employees that they are wanted, loved and appreciated. When front-line employees are paid very little, it’s critical that you work hard to make them feel appreciated. K-Mart has never been successful with this strategy. Few employees feel appreciated and it shows in sales and customer loyalty.
K-Mart tried both advertising and capital renovations to compete with Wal-Mart while Wal-Mart focused on customer service and low prices. Both major investments failed. Had K-Mart spent a few million dollars a year training its workforce on customer service, the results could have been much more significant.
The former chairman of K-Mart, Joseph Antonini, became a fixture in TV commercials in 1992. He spent about $80 million on a major advertising campaign that featured him and K-Mart’s supposed commitment to customer service. Sales increased 3.4%; but Wal-Mart sales increased 26%. The bad news is that in January 2007, Wal-Mart launched the same type of advertising strategy to recover its poor image in the marketplace. It was a waste of money.
Don’t lose focus on customer service
Wal-Mart has found tremendous success, despite lower paid employees, while K-Mart has struggled. During the 1980s and through 2005, Wal-Mart was in the business of serving customers. K-Mart was in the business of serving its CEO. I believe that Wal-Mart’s real service in the 1990s that was experienced and remembered every time customers shopped was simply more effective than K-Mart’s service that was mostly imaginary. The customers, at least, didn’t notice it.
One person best qualified to account for Wal-Mart’s success is David Glass, former President and CEO. He said that “the secret to Wal-Mart’s success is the fact that when he was CEO the company paid very strict attention to three basic principles.” Those principles are:
- Value and service for customers. The customer is the boss. Everything possible is done to make shopping at Wal-Mart stores a friendly, pleasant experience. Wal-Mart associates strive to provide exceptional customer service.
- Partnership between the company and its associates (employees). A family-like environment that stresses teamwork.
- Commitment to communities in which stores are located.
Now Wal-Mart is trying to compete with K-Mart for poor service, and has turned its focus to price, which I do not think is sustainable. Their executives and the board do not get it. If they took this same money over the next two years and spent it to change attitudes and performance of the entire workforce to master the art of customer service, the company would not have under-performing stores. Wal-Mart would be wise to return its focus to better customer service, which served them well for so many years.