Affluent Savvy
Affluent Savvy
Photo: cottonbro studio
The most well-known measure taken by the Ritz Carlton is called the "2000$ rule". According to that rule every employee of the hotel is allowed to spend up to 2000$ to rescue the guest experience without having to ask any manager. Importantly employees can spend that amount per incident and not per year.
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Read More »Welcome to our third post in our serie "Customer centricity: Walk the talk". Last time my colleague Maurits Muth shared his view on how Lemonade is using "simplicity" to redefine the customer experience in the insurance industry. Today I'd like to comment on another facet of customer centricity which is very often underestimated by companies, yet has a tremendous potential to truly WOW customers: TEAM EMPOWERMENT. I'm sure many of us have already been in a situation like this one: your telco provider failed to upgrade you internet connection and after half an hour in the hotline the only answer you get back is "there is nothing I can do, but if you want I can pass you on to my manager". So before you wait another half an hour to hear the same answer again, just from one level up in the organisation you resign and hang up. Well, if you happen to be a customer of the Ritz Carlton who has an issue during his or her stay, the story would unfold in a very different way. The Ritz Carlton is regularly ranked among the companies with the best customer service in the world. One of the key reasons for such a performance is the absolute commitment of the company to empowering it's employees to delight customers. The most well-known measure taken by the Ritz Carlton is called the "2000$ rule". According to that rule every employee of the hotel is allowed to spend up to 2000$ to rescue the guest experience without having to ask any manager. Importantly employees can spend that amount per incident and not per year. When researching the "2000$ rule" I found out something quiet astonishing: this rule was initiated by Horst Schulze during his tenure as founding president of the Ritz-Carlton in 1980. In those days 2000$ would buy a ten night stay on the club level of a Ritz! By allowing employees to spend such an amount of money, the Ritz Carlton doesn't only put its money where its mouth is - the 2000$ rule is just one of several manifestations of the company's purpose of "being ladies and gentlemen that serve ladies and gentlemen". What the 2000$ rule also does is signalling their customers that the Ritz Carlton really values relationships over transactions.
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Learn More »Another thing that sets the Ritz Carlton apart from the rest of the pack is that the company didn't just define that budget out of nowhere. It used all available data to measure the value of their customer relationship. Based on that information the Ritz Carlton was able to decide how much it was willing to pay to nurture and protect that relationship. The data showed that the Life Time Value of a Ritz Carlton customer was about 250.000$. When you know that a guest will spend that amount of money during his of her life span, then spending 2000$ to protect such a relationship is still a remarkable but also a much easier decision to take. Obviously not every business can afford a 2000$ per-incident budget for service recovery, but that's not the point. What matters is to define how your business can use some of the principles that turned the Ritz Carlton into a five star company when it comes to customer service: Embrace the idea of a relational approach over a transactional approach: when you do that you empower your team to take the actions necessary right in the moment, even if it results in an unprofitable interaction at the time. Your employees will take the appropriated measure because they know that in the long run they will be rewarded with loyalty and that the customer relationship they will preserve is worth far more than any individual transaction. Making sure that front-line employees can respond in an immediate way has become even more important in times where unhappy customers can trigger a social media shitstorm in no time. Create and live an Empowerment Culture within your company: there are at least 5 reasons that speak for establishing a strong empowerment culture. First, as evidenced by the Ritz Carlton case empowerment leads to significantly better customer service and thus customer loyalty. A Gallup study found “organizations that empower employees experience 50 percent higher customer loyalty”. Second, empowered employees deliver better work. Third, empowered teams aren't just happier they also collaborate better which in turns leads to better ideas and output. Fourth, empowerment boosts innovation and speeds up processes. Last but not least, engaged employees lead to a more profitable business: studies show that companies with high employee engagement are 22% more profitable. Define a robust metric for the value of your customer relationship: if you don’t know what a customer is worth, you don’t know what you should spend to get one or what you should spend to keep one. The only reason why the Ritz Carlton feels comfortable whenever employees make use of the "2000$ rule" is because they can put a number to the value of their customer relationship and feel confident, that spending that kind of money will results in protecting something far more valuable. As Maya Angelou a famous American poet, professor and actress once said: "people will forget what you said, people will forget what you did, but people will never forget how you made them feel". That's more than just a quote. It's a human truth that the Ritz Carlton embraces every time it puts the value of the relationship above everything else.
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