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 / Spring 2007 / Issue 46(originally published by Booz & Company)


The Luxury Touch

Superb service is the indispensable ingredient of successful high-end brands. Follow four principles to deliver customer satisfaction year after year.

Illustration by Lars Leetaru
What distinguishes a stay at the Ritz-Carlton from a night at a comfortable, midlevel hotel chain? A room at the Ritz offers superior luxury and creature comforts, of course, but its most important differentiator is an unsurpassed level of service, as reflected in the company’s top rankings for guest satisfaction by J.D. Power and Associates and its two Malcolm Baldrige National Quality Awards — U.S. government–sponsored citations for rigorous attention to and delivery of quality.

The same dedication to service famously distinguishes Nordstrom from other high-end department stores. Competitors sell comparable, often identical, goods, but they cannot match Nordstrom’s top ranking in consumer surveys, including those conducted in 2006 by American Express and the National Retail Federation. Similarly, the quality of service explains why Lexus, the top-ranked brand in J.D. Power’s customer satisfaction surveys, consistently outpaces other makers of luxury cars. And at the local retail level, top-notch service helps Park Place, an elite car dealer in Houston and Dallas/Fort Worth, regularly take first place in statewide customer satisfaction surveys.

The relationship between quality of service and the luxury touch is often noticed, but its significance is rarely understood. A recent Booz Allen Hamilton study suggests that with luxury brands, the excellence of the underlying product is merely a starting point. Interviews with 40 executives at a broad spectrum of high-performing luxury brand companies confirm that what makes these luxury products truly stand apart is the superb level of service in which they are wrapped. Indeed, the services surrounding each of these brands can be viewed not only as an intrinsic part of the products themselves, but as an important differentiator of the brand.

Companies like Ritz-Carlton, Nordstrom, and Lexus can guarantee service that goes the extra mile because, in effect, they’ve programmed their organizations to foster customer-centered behavior in employees at all levels. Although there’s no single process for achieving high levels of customer satisfaction, four principles are common to nearly all top-performing luxury brand companies:

  1. They create a customer-centered culture that identifies, nurtures, and reinforces service as a primary value.
  2. They use a rigorous selection process to populate the organization with superior sales and support staff. The impulse to care about accommodating customers cannot be taught to people who are not predisposed to it.
  3. They constantly retrain employees to perpetuate organizational values and to help them attain greater mastery of products and procedures.
  4. They systematically measure and reward customer-centric behavior and excellence in sales and service to enforce high standards and reinforce expectations.

When these four principles are at work, the result is a highly integrated business model that combines a superior product line with outstanding sales and service quality, driving strong growth and profitability in the process. Over the past five years, for example, Ritz-Carlton sales have grown at a rate of 12.7 percent per annum, compared with a rate of 1.8 percent for the rest of the luxury hotel industry. Nordstrom’s U.S. sales have grown at a rate of 8.3 percent, while sales for other nondiscount department stores have declined 1.6 percent. And Lexus sales have grown by 7.8 percent, compared with just 0.9 percent for other luxury auto brands.

Values First
None of the four principles can be omitted or glossed over without jeopardizing the entire effort. When it comes to sales and service excellence, the leading luxury brands do not take shortcuts. “Great customer service is not an initiative,” says Greg Holland, manager of Nordstrom’s Michigan Avenue store in Chicago. “It is not the thing of the day. It is part of our culture.” High-performance luxury brands maintain their commitment to service in good times and bad, emphasizing long-term vision over short-term expediency.

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