Service Leaders Have Higher Value
In May 2003 I invested $9,000 ($1,000 ea.) in 9 service leaders. Today this investment is worth $34,363. I wanted to prove that service leaders continue to grow because they focus on the service strategy. Hard to understand the reasoning why CEO’s do not focus on a service strategy. Probably because they do not understand how it impacts market share, brand and the value of the business. Following is proof that a service culture will increase the value of a firm by over 25%. Take a look:
1. Amazon AMZN June 2, 2015 Value $13,731
Amazon is the largest Internet-based retailer in the United States. No firm has done a better job of improving the customer experience. Everything is built around customer service. My $1,000 increased in value 1,350% …not 25%. Jeff Bezos the founder is paid $81,840 a year and because he has driven his firm to deliver awesome service he is the 15th wealthiest person in the world. (He also gets $1.6 million in security which he includes as income. Personally I would not count this as compensation.)
2. Costco COST June 2, 2015 Value $5,147
Costco Wholesale Corporation is an American membership-only warehouse club that provides a wide selection of merchandise. As of 2014, it was the third largest retailer in the United States; in 2015 it is the second largest in the world and the largest membership warehouse club chain in the United States
In the May newsletter I focused on Costco. They understand quality, prices, value and customer service. Light years ahead of Sam’s Club owned by Walmart.
3. Home Depot HD June 2, 2015 Value $4,935
Home Depot is a great company that from the beginning has focused on customer service. They are an American retailer of home improvement and building products and services. This is a “big box store” that understands the power of the service strategy.
4. TD Bank TD June 2, 2015 Value $3,091
TD Bank purchased Commerce Bank in 2007. It is now a “Bank” according to Vernon Hill the founder. They continue to eliminate many of the small things that made Commerce a service leader. If the bank had not been sold it would have outperformed Amazon. While Vernon Hill was CEO it always was number one on this list of nine service leaders.
In 2016 Metro Bank in London will most likely go public. I will let you know via this newsletter when it happens. It could be the single best investment of your life time. You can believe in what I am saying… it will outperform any other investments you have. At Commerce Bank he increased the value 470 times.
5. Southwest Airlines LUV June 2, 2015 Value $2,429
This is the most customer driven airline in the US. They are the largest domestic airline in the US. Most US airlines are trying to figure out how to charge you more and provide less. Southwest does not charge to change your ticket and does not charge for the first 2 bags. Employees all understand they are in customer service. NO airline in the US can match them.
6. Walmart WMT June 2, 2015 Value $1,682
In 2003 they were a service leader. Sam Walton built a company around price and customer service. Under Lee Scott former CEO they dropped their focus on service and now it is all about price. You can never win the battle just on price. The Walton family is the richest family in the world. When you already have billions I guess the need for greater wealth is not very important. Once you lose your focus and brand on customer service it is very difficult to recover it.
7. JetBlue JBU June 2, 2015 Value $1,477
Jet Blue built a company around customer service. When they destroyed their brand with the Valentine’s Day February 21, 2007 snow storm at JFK airport the stock has never recovered. They kept the passengers on the plane for 13 hours with NO SERVICE RECOVERY.
The airline was founded in 1999 and was doing an incredible job of building an airline around the customer experience. After the JFK incident, the CEO was fired, they sold a huge portion of the airline to Lufthansa at fire sale prices and the value of the stock was demolished. It is a perfect example of what happens when there is no empowerment or service recovery.
8. General Electric GE June 2, 2015 Value $1,433
Jack Welch, former CEO, did an incredible job of increasing revenue, focusing on customer service, reducing the number of employees and increasing their performance. Jeffrey Immelt who took over September 7, 2001 has lost his focus on the “customer experience.” While the stock has done nothing in 2014 his compensation was increased to $37.2 billion. In the US there is a direct correlation to incompetence. Immelt is over paid and the value for the shareholders is not there. On the other hand, Jeff Bezos’ compensation of $81,840 is thousands of times a better value for the shareholders.
9. Dell DELL June 2, Value $465
Michael Dell took his company private October 30, 2013. Dell built a computer company around customer service, speed, quality and price. In 2004 Michael Dell retired and turned the company over to Kevin Rollins who was a “numbers” guy. The first thing Rollins did was to eliminate the focus on customer service and outsourced it to India.
After Dell lost value, Michael Dell decided to return in February 2007. Since then, the company has never been able to recover its brand and image. The customer experience improved but it is still not the same. The value of my $1,000 was reduced to… $465.
Once you lose your brand and image built around customer service be prepared to lose over 50% of your value. It takes a lot of work to drive a service culture and money. There is no better return on your investment than focusing on creating a work force educated to delivering exceptional service. I suspect the CEO’s of Dell, GE, JetBlue all feel they deliver awesome service. The fact is they lost their focus and the result was felt in the marketplace.
