Nordstrom is the gold standard for customer service excellence -- and, amazingly, word of mouth is its primary marketing tool.
For the rest of the June 2005 issue of CRM magazine please click here
Not many American businesses can boast that they are members of the 100-year-old club. To make it requires vision, discipline, and an ability to navigate turbulent times and meet ever-changing market demands. Members of the club have survived two world wars, the Great Depression, JFK's assassination, the Cold War, terrorist attacks on U.S. soil, and William Hung's assault on contemporary music. Yet despite adversity, luxe retailer Nordstrom has managed to survive with particular elegance and style.
Robert Spector, coauthor of The Nordstrom Way, has picked the brains of Nordstrom customers, employees, and executives since the early-1990s. He travels the country teaching people in every kind of business that although the 104-year-old company's approach to excellent customer service may be unique, it's not impossible to imitate.
Lior Arussy, president of Strativity Group and author of Passionate & Profitable, calls Nordstrom's business strategy greed through love. "[At] Nordstrom they zero in like a laser pointer on the right customers...and shower them with love," he says. Strativity conducted an annual customer experience study that revealed 60 percent of executives don't feel they deserve customer loyalty. The reason, according to Arussy, is that they don't understand the customers' value. Businesses invest tons of time in a customer, but don't have a three-year plan for that person--they can't think beyond the one sale. "We all look at Ritz Carlton and Nordstrom and Starbucks, and we're jealous," Arussy says. "But we're not doing anything. Stop staring. Stop thinking you can't do it and start doing."
Spreading the News
Nordstrom's impeccable reputation in customer service comes not from its executives or marketing team, but from the customers themselves. The retail giant is willing to take risks, do unusual and often expensive favors for shoppers, and has been said to accept returns on items not even purchased there. But big risks often yield big gains. Word starts to spread that it's doing crazy things for its customers, and they are telling their friends. Pretty soon this word of mouth, or viral marketing, lures new people to the store--even people who have no idea what's inside want to experience what it's like to shop there.
Spector recalls a story of a woman with one leg who approached a Nordstrom salesperson and jokingly bet that the store doesn't sell just one shoe to people. She lost the bet and Nordstrom lived up to its reputation, gaining a lifelong customer advocate in the process. "Who knows how many times she's told that story?" Spector asks. "Do you think that that's worth the price of a shoe? I do."
Since its inception in Seattle in 1901, the store has always been known for stocking unusual sizes and selections. Deniz Anders, a company spokeswoman, attributes that to the Nordstrom family's Swedish roots: Many of their friends had large feet. Sympathizing with a particular person's needs and going out of the way to help is how the store earned its reputation.
Anders says stories like the woman with one leg ultimately allow Nordstrom to spend much less on advertising than its competitors do: "We believe that word of mouth is extremely important. If [the customers] have a good experience, they will tell their friends." That method of marketing is statistically shown to provide better results than basic brand advertising, according to Sheryl Kingstone, Yankee Group Research's CRM program manager.
"Price discounts do not amount to a culture in services," she says. "That's more of the cultural mystique to where Nordstrom's been. They don't go down to the level of the average retailer, advertising all the time (and showing off all their merchandise), which can drive a customer into the store out of curiosity. Less is more."
Strativity's Arussy agrees. "Companies that love their customers don't need to advertise," he says. "When they don't [love their customers]...in many ways you need to drag them in against their will. When your value is great enough, they will come." The same greed-through-love approach holds true for the retailer's exchange policy, which is no-holds-barred. Kingstone regards it as "extremely lucrative to the customer and not the spender." Most customers are honest, but even if someone gets money back for a 20-year-old pair of shoes, that person is now in Nordstrom with a handful of cash, rather than in a competitor's store. "It's all about return visits and larger share of wallets," Kingstone says.
Patrick McCarthy started at Nordstrom in 1971 at age 26 and earned the honor of top salesperson for many years of his 30-year tenure. He was also the first employee to generate $1 million in sales (this year 61 people achieved that goal). But the journey was not an easy one. McCarthy almost got fired because of his poor performance, being so focused on selling that he "missed the opportunity to be a better employee." So he found a mentor in the men's department to help him discard his bad habits. What he learned help guide his career: Remember people's names; if you say you're going to do something, do it; always be available to customers; and go the extra distance to make sure they're cared for. "The impression you want to leave on them is you're a professional, you're not a clerk. There's a difference," he says. "But if you say you're going to call them, you better do it. I call it the spirit of intent."
McCarthy likes to get personal with his customers, ask them for their cards, and set up future shopping dates. He remembers people's anniversaries and their wives' birthdays. He would allow customers to take home suits to see what their families thought about the purchase. "A relationship is everything. It can be lifelong and it can be short-circuited. You choose whether you want the lifelong or not, and you do that by the degree of commitment," he says. "A relationship is both powerful and fragile. You can lose it as fast as you get it.
"It's a heart experience," McCarthy says. "Most companies are head experiences--bean counters are running them. When the heart is running them, it becomes exciting."
To help keep track of his 12,000 customers, McCarthy had a personal customer book. At the time, it contained notes on paper and a lot of notes in his head. Now, employees keep records electronically. They can be alerted when unusual sizes and shipments will be coming in and can be reminded to call customers when alterations are ready. Inventory is also tracked electronically, so salespeople can quickly determine which nearby stores may have a particular item they don't have on site, instead of having to call several numbers on a list.
There is no doubt Nordstrom makes customer service a priority. As a result, people go crazy every time a new store opens. "It's a Nordstrom tradition for salespeople to line up on either side of the entrance and applaud customers as they come in," Spector says. "It's beyond the merchandise. They know they are going to be treated in a special fashion. When Nordstrom comes to town, it raises the bar for every other retailer and every other business."
Employees Decide, Managers Support
During his lectures, people come up to Spector and tell him stories that start with "I have this salesman...," Spector says. "Salespeople are always claiming customers as their own, but when customers claim a salesperson, that's powerful." It's like having a hair stylist or mechanic. Sometimes you'll follow them or you'll move away and still come back for their services. "Patrick embraced the new system and used it to his advantage, and built up a clientele over a period of time. [Nordstrom] gives you that opportunity."
When interviewing potential employees, McCarthy took part in role reversals, playing both the customer and employee. He asked prospects about their worst customer service experience and how they dealt with it, as well as their best. "I like to talk to them," McCarthy says. "What I see on the resume gives me sketches, but I'm interested in the person behind the words."
McCarthy says he was able to build a "franchise within a franchise," but had to take a chance. "When you go to the ocean and you're standing there looking at the water, you have a choice. You can either step into it or stand away from it. I've always chosen to step into it and embrace it." McCarthy felt empowered to pave his own career path and to bring customers along with him. That level of authority is a huge plus, according to Kingstone: "[The] closest people to customers are the ones that should be able to make the decisions. There's nothing more frustrating than knowing you're not talking to the person empowered to help you."
Many companies claim to give power to their employees, but Nordstrom actually does. "Empowerment is an abused word," Spector says. "Nordstrom gives the people on the frontline the ability to make decisions and then managers back them on those decisions." Giving that kind of authority can be a huge risk and a scary undertaking, but top executives can't possibly micromanage an enterprise that big and know everything the employees who talk to customers on a daily basis know.
Nordstrom has but one rule, according to Spector: Use your good judgment in all situations. The more rules you have, the farther and farther you get from the customer. "If they make the wrong decision, you can use that as an example, but that takes courage. Customer service is not for wimps--it's not for the faint of heart." Anders says the company does not provide customer service training, only register training and diversity training. Kingstone says that on-the-job learning is dangerous: "Customer service comes at a cost, and there's a way to minimize that risk."
Creating a Culture
Many companies turn around and claim they are going to start putting customers ahead of themselves. Spector says the idea sounds nice in theory, but that it's not easy to change an organization's DNA. "It's very hard to create a customer service culture where one has not existed," he says. "Nordstrom has a consistency of purpose. That's key. It comes down to hiring the right people and then truly empowering them to take care of the customer." The reason the company has that DNA is, almost all the stores' managers worked their way up from the stockroom or sales floor, instead of being hired from the outside. That includes top executives, according to a company spokeswoman.
Expectations must be met: Employees must be on time, have good body language, and speak clearly. But a desire to form a career and a sense of ambition take top tier. "I don't expect them to stay at Nordstrom forever," McCarthy says. "But I want them to get a taste of what extraordinary service is so that one day they won't be embarrassed because someone will outdo them."
"Nordstrom wants nice, motivated people," Spector says. "You can't take somebody who's not nice and make her nice, or motivated. You can teach the business--that's the easy part." McCarthy cites an example of a woman who was traveling and accidentally left her plane tickets at one of Nordstrom's shoe stores. The saleswoman attempted to call the airline and remedy the problem, but they had rules they had to follow, and said they couldn't help. The saleswoman used her own money to take a 45-minute cab ride to the airport to ensure the woman made her flight. "That goes over and beyond what an employee would do," McCarthy says. "We can look at basic service or we can look at heroic service. I'm looking for heroic service, someone who really goes beyond."
The 100 Club
Ford Moter Company
The Basics: Ford was founded in 1903 when a dozen people, including Henry Ford, pooled $28,000 toward incorporating as auto manufacturers. That humble beginning, and the idea of making cars into affordable vehicles for the average citizen instead of luxury playthings for the wealthy, led Ford to become one of the world's largest corporations. Ford's assembly lines (the company's most noted innovation, introduced in 1913) employ more than 320,000 people in building cars, trucks, and other vehicles for consumers worldwide.
Interview with Ana Dan, CRM manager, Ford division:
Longevity: We've come a long way from 'Any model, as long as it's black.' There's a lot to be said for the product, of course, but Ford is much more responsive with product offerings, listening to what customers want instead of telling them. The new Mustang is an example of that--[we took] input from customers and [shaped] our offerings to them.
Our current philosophy is to focus on the customer experience at every touch point. The technology to do that is important, or else the philosophy is just words. We're using an AmDocs CRM campaign system on our proprietary database, at least for now. It allows us to have a corporate memory of customer contacts and interests, which in turn lets us go to market with integrated communications with our dealers and customers. We're also reevaluating our CRM/ERP needs to continue to grow our integration and multichannel capabilities.
CRM Secrets: Beyond its value to customers in ordering exactly what suits their needs, our Build and Price service on the Web has been a huge ROI for us. Data gathered from prospective buyers configuring their cars--including the Ford Fusion, a car we won't be launching until 2006--allows us to provide a heads-up for our dealers in terms of what they need to have in stock, and how to start a customer dialogue. We were able to do the same thing with our relaunch of the F-150 truck. We got an unprecedented number of prelaunch handraisers and were able to convert many of them into buyers. --Marshall Lager
Calley & Currier
The Basics: The company started off with a couple of people carving and shaping wooden crutches in a garage. The difference is, this New Hampshire company survived and grew large enough to be able to consider expanding overseas. It is still making wooden crutches after all these years, though the design has changed somewhat.
Interview with Woody Sponaugle, CEO:
Longevity: Crutches are like caskets: Nobody wants them, nobody likes them, but sooner or later everybody's going to need one. In the big picture, this means that demand for our products doesn't change much year to year.
I like to say that our product has a 5,000-year life cycle. The earliest crutches were just sticks with handles. Eventually, somebody came up with using two sticks and padding the top--the last major innovations came around 1980, when the industry started using laminated wood instead of solid, and adjustable handles and bases became common.
CRM Secrets: Competition with Chinese and domestic aluminum crutch manufacturers means we'll be moving some of our operations out of the country, especially to South America and Asia. So even if I'm traveling to Brazil, NetSuite's dashboard lets me see all our relevant sales stats quickly and easily. I can drill down for the numbers I need, month-to-month sales, order trends for a week, quarter, or whatever, scan the top-15 open sales opportunities or orders, anything. Prior to starting with NetSuite, we depended on an accountant to generate our statistics, and that took time and money. NetSuite allowed us to eliminate the position and trim the staff, which saves us $50,000 to $75,000 annually. The CRM suite updates automatically, so we don't need a big IT staff or consultants. Finally, we have instant problem-solving in our customer service department. --M.L.
Industry: Property Services and Real Estate
The Basics: Savills started as a family-owned business specializing in property and estate management. Most of its business was originally farms and rural properties throughout the U.K. The firm is still known as a residential agency, but it has expanded to commercial property and all aspects of financial services.
Interview with Richard Coleman, group IT director:
Longevity: Savills has expanded into new markets to meet the demands of the changing business environment. Obviously, the rural and farming property business isn't what it used to be. In particular, we have expanded over the past seven or eight years into finance. We're also a young company in terms of staff, and are willing to take chances.
CRM Secrets: Eight or nine years ago we had no central system in place due to rapid expansion, and we couldn't share information across business segments. Other companies' property business--specific CRM offerings were really no good. Many still aren't, so we turned to Pivotal. We molded their CRM suite to our needs, and now share a single database across the company. It's become more of an ERP application now. For that matter, by building the back end of our residential agency business first and adding a Web face, we meet the requirements of vendors and buyers, manage inquiries and the work-flow process, and bring in upwards of L380 million in transactions annually through our Web site alone.
Savills Private Finance is an FSA-regulated business, and as such must produce a tremendous amount of documentation to show compliance with ever-changing regulations. Failure to comply with regulations, as well as to consolidate information on the offerings of more than 100 lenders, would remove our license to operate as an independent broker. The Pivotal system allows us to manage this. --M.L.