-
The Treasury Department has ordered board appointments to two banking companies that have missed dividend payments on its bailout investments.
July 21
With potentially millions of once-sticky customer relationships now
Like going to the bank, shopping for groceries is chore. But at Stew Leonard's, which has three high-end grocery stores in Connecticut and one in Yonkers, N.Y., it's almost enjoyable. The free samples are ample and the musical automatons (and live animals during the warmer months) keep the kids entertained. The produce is fresh — something you don't always find in the New York area — and the selection of gourmet foods is wide. (The company also has nine wine stores in the New York area.)
Perhaps most importantly, the staff is friendly and helpful, to a person. This goes a long way toward explaining why the stores remain packed on the weekends, in an anemic economy, even though bargain-hunters may find lower prices elsewhere.
From the sign in the parking lot that says "we're glad you came" to the robotic cows in the dairy aisle who croon that "the customer is always right," shoppers are constantly reminded that this is a store that puts a high value on service. That can't always be said about retail banks, particularly the big ones that up until now have relied on the convenience of having ubiquitous branches and ATMs, and the
This summer American Banker interviewed Stew Leonard, Jr., the grocer's president and chief executive, to get some pointers on handling customers that can be applied in financial services. He shared his strategies for finding and motivating front-line talent, making customer service a companywide priority and retaining longtime customers when competitors bid for their business with lower prices. In a follow-up exchange this week, he also reflected on his experience as a director at a bank that failed in the early 1990s.
Broadly, what do you see as the most important elements of customer service?
STEW LEONARD, JR.: I don't try to make this sound too fancy. You're trying to help a person who is doing business with you and make it as convenient for them as they can. That could be just helping them get through a checkout line, smiling with them or being nice to them. A lot of times people mention 'customer service' and they think of that transaction that happens when somebody wants to return an item. I try to avoid those incidents as much we can. If you're doing it right within the company, you shouldn't have a lot of returns and you shouldn't have a lot of angry customers.
But you're still going to get them. And I just really talk to all our people and we train all our people. When you see a customer, they're very valuable. We always look at it that they spend a hundred dollars a week in the store. If you look at that over a year, that's $5,000. So each customer that we encounter in the store is like a $5,000 investment. We want to take care of that investment and not have them go to another store to shop.
A hundred dollars a week, is that an average per customer?
STEW LEONARD, JR.: Roughly. Yes.
You mentioned smiling. How do you motivate someone who works on the frontline in retail to be pleasant and engaged?
STEW LEONARD, JR.: Well, I think the beginning starts with hiring. You really have to be very careful about hiring. We only hire maybe one out of 10 — it's even higher today due to the economy. But we really look for that attitude, that smile, that little extra that the person shows us when we're interviewing him. How are they dressed? You wouldn't believe the way some kids come in for an interview today. It looks like they just rolled out of a party last night.
Other kids that come in, they look very nice. They just are putting an effort to present themselves.
We also look for what their attitude is like. Will somebody get them in a bad mood or very defensive quickly? Because no matter how you slice it, you're going to have some grumpy people come through your register line every day. Some people look at that and it gets them in a bad mood, and other people look at it and [say,] "You know what? I've got an opportunity here. I'm going to try to get them to leave with a smile." We try to hire the second type.
Once they're on board, how do you maintain them?
STEW LEONARD, JR.: Everybody must go through an orientation, which we modeled after going through the
We'll do some role playing: What happens if a customer comes back with an item like this? How do you handle it? You try to give them examples of some things that will happen in real life. Then every year we do a customer service refresher. So we bring everybody back through another customer service class.
The other thing that's really important is to tell stories all year. We have monthly communication meetings with all our people. The managers stand up, they have to tell a customer service story — something that happened to them. It's not about a training class or a "shot" that we give them at any one time. It's really about trying to develop this within your culture.
Is there a particularly memorable customer service story from one these meetings?
STEW LEONARD, JR.: One of the ones that our CFO has been telling didn't even happen at Stew's. He went to college up in Boston and he brought his wife up there. They were having their anniversary dinner. He went to a restaurant called Da Vinci's up there. When they walked him in, they gave him a table right next to the bar. He's trying to have a romantic dinner with his wife and all of a sudden this bar starts filling up. They found out that it was the night of the Final Four. And all of a sudden he can barely hear his wife speak and there's a guy just about with his back to him, as he's sitting at his table.
He just said to his wife, "You know, I'm going to say something." She says, "Oh, no, no, no. Don't say anything. This is fine." He said, "No, I want to say something." So he gets up and walks over to one of the waitresses there and he just unloads on her. He was frustrated. He probably was a little curt with her.
Two minutes later, the manager comes walking over to the table, and he's like, "Yikes, I'm going to probably get thrown out of here." Instead, the manager says, "You know what? I am so sorry. Would you and your wife please follow me?"
They followed him over to this beautiful little table. They had a candle lit at it and a bottle of champagne. He said, "You know, I'm really sorry. I don't know why you got put in that seat there. We would love you to have your romantic evening. Here's a bottle of champagne on us." Later, the chef, who was the owner, came out and said, "We got a little taste of this dessert for you to try."
He said, "You know what? I walked out of there totally happy."
And he would go back.
STEW LEONARD, JR.: He went online and gave a recommendation for the restaurant. So that story we would encourage him to tell maybe a dozen times this year to all different groups of people that he's with, and including the bankers when they come in. And I'm sure he'll tell that story to Bank of America when they come in. Everybody in the store listens to that and says, "You know, we can do that too."
You mentioned the managers speaking at these meetings. Do you have ways of specifically getting feedback from the very frontline staff, the people at the checkout counter?
STEW LEONARD, JR.: Each month we have what we call a communication meeting. At that meeting we have — we call it an idea box. Everybody takes any question they have at all or idea and anonymously they just put it in this box. Happens to have cow spots on it. Then the manager takes that box and one of the things he does in the meeting is read every comment and try to answer it. If he can't answer it, he tells them. "I don't know the answer to this one but I will find out."
That's one way. I find that's an effective way to do it. Another way we have on the intranet an "Ask Stew" where you can go in and you can ask me any question you want.
Then we also have every month a lunch with the president of the store. That's what his role is, to try to talk to everybody and just see how things are going. Do you have any ideas? You always hear things like "the ice machine doesn't work at 5 a.m. in the morning. I have to fill the displays with ice." Or "the meat department is using the wrapper at 8 a.m. when I need to use the wrapper for the seafood department." Two managers in each department just have to work it out.
Each individual store has its own president?
STEW LEONARD, JR.: Yes, and its own HR Department.
Is that efficient, to have an HR department with each one?
No, it's not efficient, but … we do training in each store. Our team members have a lot of questions about their benefits or policies and so forth. Questions about their schedules ... somebody they can go to, to get answers.
Is it fair to say that Stew Leonard's competes primarily on service rather than on price?
STEW LEONARD, JR.: I think it's a blend. I don't think it's just one area. I think that's what makes any of these businesses complicated. If it was one thing, it would be very easy. In our company I think you definitely have to have great quality and we talk about that as much as customer service because nobody wants to eat "fresh-cut" watermelon that was cut yesterday. We have to have not only sweet watermelon, but be right on top of making sure it's real fresh. That's very important to the customer.
A second thing, of course, is price. Especially in today's economy, you have to be very price competitive and customers today are definitely looking at their pocketbooks and their wallets and they're saying, "You know, I don't need to buy a $50 bottle of wine. Some of these $20 bottles look pretty good. Let me try one." Price is very important and then the service part of it, of course, is important. You want to be nice to customers and you want them to have a pleasant experience when they come to the store.
A lot of our people in the store have just over the years developed a nice friendship with our customers. One of the real backbones of customer service is your turnover.
If you don't have good HR systems in place, it's very difficult to execute on the customer service set. We always say you can't make it a great place to shop, unless you first make it a great place to work.
How are you incorporating social media and technology like that into sales?
STEW LEONARD, JR.: Let me scratch my head for a while. [Laughs] Frankly we've got the Facebook and the Twitter and we are on the Internet. But it's so new now and it's so gaining in popularity that I think every company just has to have their eyes wide open when it comes to social media. It's the kind of thing that, you have to get into it. We're meeting just next week down in New York City with a digital marketing company [that] specializes in all this social media. We're just going to brainstorm for six hours.
Do you see any relevant parallels between what you're doing in the grocery business and what banks could do, or might be doing, with their retail strategies?
STEW LEONARD, JR.: I think there are parallels in every business. Every business has to offer service and at some point, it's different than what we do at Stew's, but service has to be provided in the banking business. The person that we deal with at the bank, they have to develop a relationship with us. Just like I need a customer to buy their Thanksgiving turkey and bring it home and be happy with it, and love their Thanksgiving turkey. The banker has to make sure that I'm happy and I'm getting everything I need from their bank and services.
Obviously, just like in food, there is a lot of competition in banking. A lot of times, when we go to refinance, you don't just go to your one bank that you've always been doing banking with. You usually bring in two or three other banks. They're all hungry; they're all aggressive. Sometimes you look at the price and one of them might be a little higher than the other and there might be one that is a little lower than the one you're dealing with. When that happens, the determining card is, how has the service been with that bank? What relationships have they established with you?
We are faced with that decision all the time with different suppliers. We'll be dealing with, say, a chicken farmer down in the Amish country. We'll have somebody else come in and offer us a lower chicken price. We have to decide. We've had great service from this person. They've been delivered on time. It's been great quality. Anytime we've ever had an issue they were snap-crackle-pop, "we'll take care of it." They've been up to visit us. And they've really become a friend in a way.
Whenever the price decision comes up, we always look at that relationship and put a value on it.
So a history of good service can trump X number of basis points?
STEW LEONARD, JR.: Absolutely. Don't tell that to Bank of America because we're getting ready to refinance. [Laughs] A lot of times if you just make a decision on price alone, sometimes it turns out to be the most expensive route you took because you don't have the good service that helps you out of a jam in the future. It's really just trying to develop a "Yes, I can" attitude among your customers. When they have a problem, or they have an issue — the first thing you want to think of is "Yes, I can."
What about retail banking? What observations do you have, as someone who runs a few stores, when you walk into a bank branch these days?
STEW LEONARD, JR.: I think the overall banking industry tends to be more of a numbers-analysis type of a person, which is obviously what the industry is about. I think the challenge that we have is trying to get the bankers to basically pretend like they were home with their families. To walk around and tell some customer service stories and to be more vocal and outgoing among the other workers there, whether they are tellers or loan officers or whatever.
Loan officers probably need to hear a lot of customer service stories. They are in the sales mode. You have to give them some examples of, how does this bank operate? What are some examples that you've encountered regarding a customer?
A lot of times in our wine business, a customer will have a question about this bottle or that bottle. What Serrat tastes like versus Montepulciano or something. We'll pop a cork and let them taste it.
I'm sure it costs some money to do that. But usually you end up with a customer that finds something they really like if they continue shopping back over and over and over with you. The nice thing is you probably have about another eight customers that day that you could still sample that wine with. It's not like you're opening two $20 bottles of wine and you're going to waste them.
You were on the board of Merchants Bank and Trust Co. in Norwalk, Conn., which failed in 1991. Can you tell me a bit about what it was like, being a director of a bank that regulators closed?
STEW LEONARD, JR.: First of all, I had a great experience being a director there. It taught me a lot. It was a classic example of an old time bank that serviced the community and helped the city of Norwalk and the surrounding areas grow.
It helped our business grow. We had a great relationship with them. The customer service was fantastic. Even coming up with Thanksgiving, if we had to buy extra turkeys, and as a growing business we needed to extend our credit line right away, they would always help us in a heart beat.
They ran into the regulatory problem, where a lot of the appraisals that were done, with the tough economy that happened there in the late 1980s, were scrutinized. The directors ... they were holding the ball at the end of the day. It did end with a sad note there. We did settle with the FDIC. The directors settled.
I was there with a lot of old time Norwalk business men who had been on the bank board. It was a difficult thing to see a great institution fold up back then in 1991.
With that, I basically learned not to go on a bank board anymore [laughs]. I just feel like it's not the kind of business that I really understand. I understand selling tomatoes and turkeys and mashed potatoes and stuffing at the holidays. But banking is another skill that I'd like to leave to others. I've been asked over the years maybe half a dozen times to go on a lot of these new startup boards and I've declined.
