February 25, 2021

TPL Insights: Building Peak-Performance Cultures #56 – How Rule Breakers Like Arthur Blank and Bernie Marcus Deliver Exceptional Customer Experience

By Rob Andrews

Everyone knows the story of the wildly successful Home Depot, particularly stories from the time period when the company’s cofounders ran it. What most people don’t know is that neither Bernie Marcus nor Arthur Blank particularly like following rules and were fired from Handy Dan Home Improvement Centers in 1978. They had always bent the rules in order to innovate and push the edge of the envelop, and often ruffled feathers in the process. They both understood that just a good customer experience doesn’t get it, because just good makes you a commodity. They embraced a bold vision of a wildly better customer experience, more variety, better service, and lower prices. They wanted to take better care of their people, drive the business with entrepreneurial spirit, respect and cultivate relationships with all stakeholders, and deliver a brand of customer experience none in their industry had ever imagined. Audacious ideas like these were out of the mainstream, and didn’t resonate with much of the Handy Dan leadership and Marcus and Blank were often at odds with colleagues.

Bernie and Arthur were officers in the Southern California home-center chain when turnaround artist Sanford S. Sigoloff took over Handy Dan’s ailing parent company, Daylin Inc. The corporate raider was notorious for gutting senior management, but as Marcus writes in the duo’s autobiography, Built From Scratch, “Handy Dan made so much money that we thought Sigoloff would be stupid to get rid of us.” Stupid he might have been, but in 1978, amidst a corporate power struggle, and citing trumped up charges of wrongdoing, Sigoloff did indeed fire Marcus and Blank. The tale of how Marcus and Blank created their hardware empire ranks as one of the greatest entrepreneurial comeback stories of all time.

When Marcus and Blank stated that they wanted to make The Home Depot “the Sears Roebuck of the home-improvement industry”, a lot of people laughed at them. No one’s laughing now. By combining the convenience and service of mom-and-pop hardware stores with the low prices and huge product selection of warehouse outlets, this dynamic do-it-yourself duo transformed a few ragtag stores into the largest home-improvement retailer in the world. Marcus and Blank have never cared much about traditional models and have always pushed boundaries beyond where the industry’s conventional wisdom suggested they should go.

My first personal experience with Home Depot was in 1992, shortly after I moved to Tampa, Florida to assume a senior operations role with Kash n Karry Food Stores. One Sunday afternoon, for reasons that still escape me, especially since I am not a DIY guy, I installed a cheap set of Malibu landscape lights in the front yard of my new home. I’d had these lights for several years and didn’t remember where they came from. When I plugged them in, they didn’t light up. I called a nearby Home Depot and explained my dilemma to the associate who promptly took my call. Without asking me any of the usual questions, he said “Well sir, just bring me the transformer and let’s see if it works. One way or another, we’ll get you fixed up”. Imagine my amazement and delight, when the sales associate to whom I’d given my old transformer, came back and cheerfully handed me a brand new one. He said “Sir, your transformer is quite old, and Malibu doesn’t make that one anymore. This one should work”. He said all of this with a big smile on his face, and without asking me where I’d bought it, how long I’d had it or if I had a receipt. When I asked how much I owed him, he said “Not a thing sir. Welcome to Tampa, have a great afternoon and  tell your friends about us”. Today, almost thirty years later, I know I’ve told this story 100 times.

Because I was then, and still am today, a student of the customer experience, this brand of customer experience was the determining factor for millions of Home Depot customers becoming what Ken Blanchard refers to as raving fans. As I discovered when working with Lou Carbone, the granddaddy of customer experience engineering, and Feargal Quinn, the owner of Superquinn, Europe’s highest per square foot retailer, and numerous other super retailing gurus, the customer experience is not just customer service. And it’s not about the retailer’s brand. It is literally about how the customer feels about themselves while interacting with you. It is all about making the customer feel special, valued, and like they’re the most important person on earth. Expensive? Not in my view.

People who really get the customer experience know that keeping a customer is a hell of a lot cheaper than getting a new one, especially when you consider the lifetime value of a customer. Too many people think in terms of a sale when they win or lose a customer. Just this week, I quit patronizing a healthy take-out restaurant because they discontinued the only two sauces I like. When I explained my dilemma to the corporate franchise coordinator, and that I’d tried all of the rest of the sauces, he politely told me that hard choices have to be made in business, and there was nothing he could do to help me. I seriously doubt that he spent even one second thinking about the fact that, theretofore, I spent about $75 a week in his restaurant, which could easily amount to $3,500 a year. If I live in the area another twenty years, which is likely, that’s $70,000. Now consider I’ve told several dozen customers about this place, and now my evangelism ceases. I think you know where I’m going with this.

Over the years, I’ve worked with and studied seven supermarket chains, five restaurant chains, two big box retailers, three quick service restaurant chains, one convenience store chain and one department store chain that delivered a customer experience that rendered them darn near bullet proof. In every case, these companies were driven by a culture of peak performance and:

  1. A commitment from the CEO never to lose a customer for the wrong reason.
  2. A senior management team equally committed to systems that advocate for the customer and recognize the experience clues that really make a difference.
  3. Mastering the secrets that make great customer experience a part of the culture, learning how to attract, engage and retain customer experience fanatics.
  4. Imparting a companywide philosophy that a superior customer experience is about how the customer feels about themselves while interacting with you.
  5. Choreographing the customer experience and teaching the 8 critical things customers always want, and instilling measurement and reward systems to incent the right behavior.
  6. Engaging the customer base, facilitating customer panels that actually work, encouraging real feedback, listening carefully, and making appropriate adjustments.
  7. Teaching that customer experience is a totality of cognitive, affective, sensory, and behavioral consumer responses during all stages of the experience, including pre- and post-purchase.
  8. Teaching that a primary objective is to deliver an experience so special, so unexpected, and so personal that it causes the customer to become intensely loyal and tell positive stories about you.
  9. Teaching that every customer complaint, comment, or suggestion is a gift and an opportunity to transform the relationship into one that is stronger and more powerful.
  10. Happy, engaged, and empowered employees who are committed to fulfill the organization’s purpose and exceed each customer’s expectations.

The purpose of all these blog posts is to share what we’re learning about building cultures of peak performance. In future posts, we’ll dig further into how rule breakers of every variety are building companies that dominate their sectors. These are organizations that practice the nine principles we’ve observed in organizations that outperform their peers: Unified Leadership, Disciplined Hiring, Leading with Purpose, Stakeholder Engagement, Cost Leadership, Measuring Everything that Matters, Customer Experience, Clarity in Everything and Staying Ahead of the Curve. If you’d like to talk about how we can help your organization, or if you’d like a thought partner, please give us a call.

Warmest Regards,

Rob Andrews
Allen Austin
Consultants in Retained Search, Interim Executives & Leadership Advisory