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BirdsEye View

Last week Dick and I were sitting at Zauner pastry shop in the remote town of Bad Ischl, Austria.  We came to enjoy Herr Joseph Zauner’s inimitable Napoleons, and his and Mrs. Zauner’s hospitality.  The place was hopping, as it always is. It never ceases to amaze me how packed this café in the middle of nowhere, Austria, in the most off-season time of the year, can be.  It was truly bustling.

 By the time we left I consumed twelve cakes and bought 30 others “to go,” plus chocolates and cookies for the grandkids, ourselves and some very special friends.

 As we were feasting, the conversation turned to our repeated visits to Zauner’s.  I’ve been going there for thirty years now.  Similarly, we’ve been going to Giolitti, that fantastic gelati place in Rome, for years.  Or Laduree, a venerable tea room (and pastry place, of course), in Paris.  The question was, what makes these places so very special for us that we feel compelled to return time and time again? Dick thought it’s the unique hospitality associated with the business being in a family for multiple generations (six generations at Zauner, for example).  I beg to differ.  I believe that our loyalty, as well as the loyalty of many others, is given due to several factors that can be repeated in any business.  Even banking...

Customer loyalty is a huge asset.  It’s core to the valuation of every business.  It creates earnings stability and predictability, the catnip of most analysts.  It reduces customer defection and, with it, the need to pay for new customer acquisition.  Loyal customers are also somewhat less price sensitive than new ones, per Fred Reicheld, which improves their overall yield to the shareholders.  Plus, it’s far more fun to serve loyal customers than brand new ones constantly.  A revolving door is simply not a great business value proposition.

As I contemplate why we keep coming back to these and other businesses the following comes to mind:

1. The product is excellent.  Whatever they sell, whether it is ice cream or diamonds, is of excellent quality.  In some cases, say pastry, the product seems to me to be the very best.  In other situations, say my mechanic who services our cars, I can’t even evaluate the product or service.  I feel the product doesn’t have to be the finest in the land but it must be reliable and function well.  In the mechanic case, the car keeps running smoothly.
2. Predictable experience and product quality regardless to the specific product.  As I mentioned, Zauner has the best Napoleons ever.  But we do try other cakes there.  It is because it is a high quality bakery, so whatever he makes is simply terrific.  The same goes for the other businesses.  At Giolitti I always take chocolate ice cream plus another flavor.  Whatever that flavor is, from cassata to blueberry, it is simply fantastic.  Our family owns several Lexus cars for the same reason.  We drive them to the bone, and they last.  When the purveyor is committed to high quality, the results are consistently good across their product line.
3. Trust.  Past experience showed me that the businesses to which I’m loyal are on my side.  They will not maximize their profit at my expense.  They’ll take care of me.  Consequently, when Dick gets me jewelry, he goes to the same people every time.  Or when I visit the dentist, it’s the same guy over and over again.  Even when he tells me I need something that isn’t apparent to me, he can explain why, show me the evidence and then take care of it in a lasting manner.  Plus, he is painless.  Nothing more I can ask of a dentist!

Another example: we own a Suburban.  Five years ago the dealer recommended a major overhaul which would have cost us thousands of dollars.  We didn’t trust him and went to our mechanic for a second opinion.  Ali said we didn’t need the expensive work, and knock wood the car has been working ever since.  We now trust Ali and never give any work to the dealer.

Similarly, I’ve had an account with meaningful balances at a bank I trusted and whose CEO I know very well and greatly respect.  I never checked the interest rate they paid on my deposits.   They had my implicit trust.  When I found out that they underpaid me for years, it led to seeking a second opinion.  My business is elsewhere now.  I feel that my trust was abused.

4. Fair price.  Dick and I are capitalists.  We believe in profits and I’m happy to pay a price that will yield a fair profit to the purveyor.  As a loyal customer, I’m even willing to pay SLIGHTLY above market prices for the high quality and service levels of the purveyor.  But once I realize they’ve been taking advantage, the relationship is over.  I believe our entire industry missed this point a couple of times, and now is paying the price en masse.
5. Feeling special.  When we go to Zauner Herr Joseph always comes and says hi.  No surprise, since I realize not many Americans are crazy enough to go to Bad Ischl for a piece of cake.  However, he remembers how many kids I have, what I do for a living, and showers me with free cakes.  He makes me feel special.  I know I represent good business for him and a steady income stream.  I know my presence flatters his ego.  And yet the way he handles me makes me feel special regardless to the amount of business I give him.  Somehow his conduct gets me there.

 As you’ve been reading my descriptions I am confident you recalled purveyors in your own life who meet your needs the same way I described above.  All of you have stories like this to tell, of special relationships, even friendships, with businesses and their proprietors or service people.  In fact, you all have tellers and relationship managers who create this experience for your customers every day.  Some times the relationship has been built by your associate doing something special for a customer.  Other times it’s built by consistent execution over time.  Either way your associates run it like they own it, which makes all the difference in the world to your customers.

In our own Forums I work hard to emulate these icons of customer loyalty.  I LIKE to pour wine in our attendees’ glasses and make sure they want for nothing.  I still remember that Stan Lukowski, who retired several years ago from Eastern Bank’s CEO position, is allergic to onions, and that Paul Perrault is allergic to nuts.  I ask our attendees not to pay our fees if they didn’t get value far exceeding it.  This business is very personal for me, and I’m told our members sense that.

My point is:  any one of us can achieve customer loyalty if we are committed to the principals described above.  This is not about ownership or money.  It is about building value and human interaction.  Those who take pride in what they do and are truly committed to helping their customer succeed and reach full satisfaction with their product or service are rewarded by long lasting, loyal customers who spread the word and bring more referrals with them than any other source.  Take your business personally, and the customers will follow.

Footnote by Dick Bird: While I agree with all that Anat said I have one place and one characteristic to add. All three of the above businesses share one other intangible that (for lack of a better term) term I call “Buzz”. These places have a very happening feel which is a result of the combination of the characteristics mentioned by Anat coupled by the fact that the owner loves his business and his product. Herr Zauner will talk endlessly about what goes into his product, the quality of the eggs and milk. He will not send us certain pastries because they will not travel well. He is enthusiastic about his product. Mr. Giolitti is the same. He can have a long conversation about his gelato with Anat even though he does not speak English and she does not speak Italian.  Another place with the characteristics Anat has identified plus a special Buzz is Kilroys’, a student bar in Bloomington, Indiana. My son has taken me there several times and it is always packed, noisy and full of IU students having a great time. There are other student bars in town but they do not have the customer loyalty that Kilroy’s has. People want to go there because the bartenders make you feel special, serve drinks quickly and have various specialty drinks. The owner circulates through the bar talking to customers (yelling in one’s ear to be heard) and generally makes you feel welcome.

Footnote from Liat: Also, when a business does something wrong, word gets out FAST. In Hyde Park, Chicago, there’s a restaurant run by an alumnus of the University of Chicago, where I went to school. I lived in a dorm slightly off the beaten path for my first two years, and this restaurant was right nearby. You’d think this would be a perfect recipe (a captive audience, so to speak, and the fact that he was an alum) but I never once ate there, because all the older students said the food was bad, the service was slow, etc. etc. The owner tried to re-invent his restaurant several times, but we would all walk a few blocks further to the Thai restaurant instead, because we had heard his restaurant was no good. It’s difficult to recoup those kinds of losses.