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


The Luxury Touch

The mutual commitment to customer service between automaker and dealer was first tested three months after the first Lexus models were unveiled in the United States. The company decided to recall its flagship LS400 model based on two unrelated customer complaints. Lexus was adamant that all of the recalled vehicles be fixed within a period of three weeks, an unprecedented deadline. Dealers picked up cars at customers’ homes, paid for rental replacements, and then returned the cars, freshly washed and vacuumed, with full tanks of gas. As one dealer recalls, “Lexus came to us and said, ‘We are in this together.… Do whatever it takes to make the customer happy, and we can discuss it later.’”

Training and Heroics
The continuous training required of high-performing luxury brand employees includes training in new products and sales procedures as well as constant reinforcement of the company values and heritage. The average Ritz-Carlton employee receives 232 hours of training per year, almost four times the average of their counterparts at peer hospitality companies. At Park Place, the Dallas/Fort Worth car dealership, the average employee receives 186 hours of training per year. This training, the equivalent of four and a half weeks, includes weekly seminars and roundtable discussions. Even experienced employees are trained in listening and sales techniques, in cross-cultural dynamics, and, of course, in new product information.

The fourth essential principle in ensuring high customer satisfaction is measuring and rewarding performance. The top-performing brands all have elaborate procedures to measure both customer and employee satisfaction, and they reward high-performing staff with extra recognition and superior compensation. Nordstrom, for example, recognizes customer service “heroes” with ad hoc cash awards, extra merchandise discounts, and favorable work-shift assignments. Individual employees and departments are also singled out for praise during morning intercom broadcasts before the doors open.

At the same time, Nordstrom closely monitors sales performance and encourages healthy competition. Sales associates’ performance records are posted for others to inspect, and all sales employees have ready access to sales figures from all departments and all stores within the chain.

Rather than measure customer satisfaction, Ritz-Carlton uses a proprietary metric it calls “customer emotion,” which reflects the concept of emotional intelligence. It also uses elaborate benchmarking procedures to ensure accountability for key priorities, including customer and employee loyalty, financial success, and continuous improvement initiatives. By setting salaries at the top of industry norms and using visible, nonfinancial recognition of employee contributions, it keeps enthusiasm high and staff turnover low. The company is also piloting a program with the Gallup Organization that closely monitors each location’s customer relations.

A Virtuous Circle
Ritz-Carlton, Nordstrom, and Lexus are all large organizations that have spent years honing their approach to creating the luxury touch through exceptional service. But their level of achievement is possible for smaller companies as well. An extraordinary level of customer satisfaction has marked Park Place dealerships since their inception in 1987. Park Place founder Ken Schnitzer, a former commercial real estate developer, wanted to change the paradigm for car dealerships, a retail category that consistently ranks low in customer satisfaction. He began by making a careful study of luxury-brand hospitality leaders, including Ritz-Carlton, copying many of their procedures for ensuring high customer satisfaction levels. For example, Park Place became the first auto dealership to establish a formal human resources department, charged with recruiting and training outstanding personnel and motivating them with superior compensation packages.

In Texas, stories about Park Place’s service excellence abound. Six years ago, a customer was unable to make it to the hospital and pulled into a Park Place dealership as his wife was giving birth to a daughter in the backseat. Park Place called for an ambulance but kept the car to give it a thorough cleaning. A year later, the dealership threw a birthday party for the little girl in its showroom. More recently, the customer of a competing dealer pulled off the road in Grapevine, Tex., with a disabled vehicle. The hapless driver had already phoned his dealer for help when a Park Place technician driving by stopped and fixed the car at no cost to the owner. Not surprisingly, the dealership has received numerous quality awards, including a Malcolm Baldrige award in 2005.

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