Heinen's focuses on customer satisfaction Featured

12:57pm EDT March 1, 2011
Tom Heinen, co-president, Heinen's Inc. Tom Heinen, co-president, Heinen's Inc.

A few years ago, Tom Heinen found himself heading to Dick’s Sporting Goods to look for a last-minute Christmas gift on Dec. 23.

What the co-president of Heinen’s found when he got there was the best parking spaces were occupied by employee vehicles. But when he entered the store, there was no help to be found and the stock was sparse. Making his way to the checkout, there were two employees nearby, but neither seemed all that interested in helping him.

“Not either of those employees showed any sense of urgency to wait on me and get me out of the store,” he says. “I thought, ‘This is unbelievable.’”

Fast-forward one year. Once again, Heinen was at Dick’s for a last-minute gift. His first thought: “Great, here we go again.” But this time, things were different.

An employee immediately asked him if he could help him find something. Surprised, he said yes and told him he was looking for a baseball bat. The employee proceeded to tell him what aisle it was in and explain that the store had different types and if he didn’t find what he was looking for, to let him know.

Skeptical and scarred by too many bad retail experiences, he headed to the aforementioned aisle, and sure enough, it was right where the employee said. When he made his way to the checkout area, there were now two televisions showing CNN and there were two people at the register, both highly engaged, who quickly checked him out in half the time from the prior year.

While he was relieved to avoid a repeat of his prior negative experience, there was something disturbing about the rapid change.

The problem for Heinen was that he didn’t see Dick’s as being a customer-service-centered business, but in just a year, it had completely changed his experience.

“If Dick’s, who isn’t even focusing on this, can get there, we have to do something differently,” he says. “That’s when we started to make a decision to distinguish ourselves on customer service at an entirely different level.”

It’s not that customer service wasn’t always the focus of Heinen’s; in fact, it’s always been one of the grocery retailer’s primary differentiators. But what the Dick’s experience showed was that if even the big box retailers could deliver a positive customer experience, Heinen’s was going to have to take the service provided by its 2,500 people up another notch.

And this is proven by the store’s own customer surveys that indicate a satisfied customer isn’t really all that loyal but a highly satisfied customer is.

“The value of highly satisfied customers, statistically, is that they’re virtually guaranteed to come back within two weeks,” he says. “A satisfied customer, the number is like 62 percent, so there’s this huge difference between having a satisfied and highly satisfied customer.

“You want to have everybody in that top box — highly satisfied — because they’re very subject to defection if they’re not.”

The challenge is, how do you go from being good at customer service — yielding satisfied customers — to being great at customer service — yielding those coveted loyal, highly satisfied customers?

It’s not the cost of a can of green beans. It’s not the color scheme in the deli department. It’s not whether the box of stuffing is on the top shelf or the bottom.

“If you really want to have a successful company, you have to have highly satisfied associates, which leads to highly satisfied customers, which leads to profit, which allows you to continually reinvest in the company, which includes the people,” Heinen says.

Choose your destiny

If you drive down Detroit Road in the western suburb of Avon, you’ll eventually be faced with a grocery store dilemma: On one side of the street is the low-cost, no-frills Marc’s, while on the other side of the street is the service-first Heinen’s. Each provides groceries, and in a lot of cases, the exact same groceries. But the two couldn’t have a more divergent strategy. One is focused only on price, the other is focused more on service.

When Tom and his brother, Jeff, the other half of the co-president duo, took over the business after the death of their father, one of the first things they focused on was to determine what their overarching strategy should be.

When you look at how to differentiate your business, Heinen says you have to consider three different models — operational efficiency, product leadership or customer service. Operational efficiency is similar to the Wal-Mart approach of being everything to everyone or competing on price. Product leadership refers to competing on your products — whether it be quality or selection — and customer service is a focus on providing the best experience for the people with whom you do business.

“The first thing you have to do is find where do you want to excel,” he says.

For Heinen and his brother, the decision was easy: customer service. Heinen’s reputation had been built on people and service, so it was just a matter of building on this foundation.

“You have got to decide, first of all, if that’s where you want to be,” he says. “I think Marc’s is one of the best-run businesses in Northeast Ohio. It’s not one that I aspire to be like, and it’s not one that I’d be personally proud to be a part of, because it’s not what we believe in, but it’s a great business model.

“The category killer stores like Dick’s or Staples or OfficeMax, they’re helpful, but they’re not winning any customer service awards, and they don’t care,” he says. “That’s not their strategy, and that’s fine. They’re still in business, and they have a heck of a lot more stores than Heinen’s does, so how can you argue their success? And Marc’s? Marc’s makes more money than Heinen’s will ever dream about making.”

When you decide how you’re going to market, you also have to look at whether the market can support your model or not. Right now, Heinen’s has 17 stores, and the market can support that based on the desire for quality products and service. Each location is carefully chosen based on demographics that show an affinity toward choosing service over just price.

“If you can imagine that the market didn’t exist for people who cared about high-quality food and a great experience in the store, if there weren’t those people, we wouldn’t have 17 stores,” he says. “We’d have 15 stores or whatever the market could support, or we’d have to build a different type of experience for the customer.”

Marc’s doesn’t invest a lot in its people, and the service is reflective of that. But because Marc’s isn’t built on service, it’s irrelevant. Heinen’s has to invest in its people, because that’s the whole key to the strategy. If your people aren’t your first priority in a customer-service strategy, it’s not going to work.

Prioritize your people

If customer service is your chosen path to success, then start by laying out expectations at every level of the business.

Heinen uses a service pyramid to illustrate where he wants his employees to be. At the bottom of the pyramid is a category called “nice, respectful.” Just above that is “helpful.” Above that is “knowledgeable,” and above that, at the very tip and where he strives for all employees to be, is “invaluable.” But there’s no silver bullet to get there.

“When people say, ‘What’s your secret?’ — it’s not a program,” he says. “Customer service commitment isn’t a program. It has to be — no matter how many classes you do, no matter how much training you do — woven into the cultural fabric of your organization so that when people come to our organization, they understand.”

It starts with placing a strong emphasis on your people, who, in turn, have to live out that culture. One of the first things you have to do is make sure that you and your company managers are communicating and clarifying on an ongoing basis.

“You have to clarify what your expectations are, and you have to provide feedback,” he says. … “Surveys will tell you that people want to know what their job is and what’s expected of them. They want to know how they’re doing and most companies are bad at both.”

A lot of companies have jobs that aren’t glamorous but are essential to success. The people in them may aspire to greater things, so it’s important to help employees find the roles that are best suited for their personalities and interests.

“The first thing we do is we try to help determine what their passions are, so if they come into work and they’re a cashier and they decide they love the bakery, we’re going to put them in the bakery, because if people are passionate about their work, they’re happier.”

And even if a particular job may not generate passion from anyone, challenge people by keeping their jobs fresh by moving them around.

For example, someone may be a cashier 80 percent of the time, but he or she may take on an extra role of being a customer service facilitator the other 20 percent of the time. In that role, the person would work with both new and seasoned employees, one on one, to help them understand how they can be better at customer service specifically in their department. Or someone may also work as a demo coordinator, so in addition to his or her regular role, he or she would oversee all the demos that go on in the stores.

“It’s not a full-time job, but it’s a way that if someone is interested in doing something different, ‘OK, here’s a way,’” Heinen says. “It could break up the monotony.”

There’s also the tried-and-true method of motivating employees toward customer service: Pay them for it.

Heinen’s supports its employees through a gain-sharing program, which began about three years ago. Each store has set goals, including financial goals, but they’re balanced by overall customer satisfaction scores, known as O-Sat. If the stores meet their goals and their O-Sat score stays at or above their six-month average, they qualify for gain-sharing. If the company makes more than its budget, that money is put into gain-sharing, and the money is split relative to how the store performed compared to other stores — so stores that did better get more money to split among employees.

“Fundamentally, you have to incent the behaviors you want, so we incent the business side,” he says.

It’s possible for one store to make its goals, but that’s not enough — the company has to make its profit goals too.

About half of the time it’s been offered, the employees have reached the levels needed to earn gain-share.

“What it does is it creates a focus in the stores around, ‘What do we have to do?’” he says.

One store really rallied around creating a great customer experience, and it earned gain-share by recording 10 points higher than what it had ever done before, which was a huge accomplishment.

“It can have a significant impact, but at the end of the day, no matter what tools that you put in place, it’s the culture that drives the experience for the customer day-in and day-out,” he says.

Survey customers

Every CEO thinks he or she has an organization that provides great customer service, but there’s only one person that knows the truth (and is usually willing to share it): the customer.

Heinen’s uses a customer survey that focuses on three areas: overall satisfaction, likelihood to recommend and likelihood to return.

From there, it breaks down into specific departments, and then into product selection and helpfulness of staff.

“Again, product side, people side,” he says. “I’ve got to win on the product side; got to win on the people side.”

Spend time thinking through what belongs on your customer satisfaction survey. For instance, price questions don’t always yield useful results, because everyone always wants lower prices.

And don’t overload your customers with lengthy surveys.

“We want to keep it to five minutes, because if it’s more than five minutes, you aggravate the customer, and we don’t want to do that,” Heinen says.

To increase participation rates, the customer gets a certificate for 5 percent off an order of their choice within a given time period. But even customer service incentives are areas that might need some additional customer service attention. Initially, the discount was off the customer’s next order, which really irritated some when their next order was only $10. When they can use it within a given period, they can plan a larger trip and maximize their savings. Customers should be highly satisfied, even when it comes to giving feedback about customer service itself.

The goal is to get 60 surveys per month per store, and an outside company manages the process.

The results allow Heinen to compare not just how his stores are performing but also compare his whole company to other supermarket chains that the survey company has as clients. This helps him see how he’s doing in the industry as a whole, which happens to be very well — competitors are around 63 percent on overall satisfaction, while Heinen’s is at about 80 percent.

Driving these numbers up plays a key role in Heinen’s overall business strategy.

“This is so much part of how we run our business, whereas other companies that we know that have them, they’ll say, ‘OK, yeah, that’s information,’ but they don’t introduce it into running the business at all the way we do. And the associates, when you talk to them, they say, ‘Yeah, that’s some survey we do,’” Heinen says. “It’s a big difference.”

Walk into any Heinen’s store and ask what its O-Sat is, all of the leaders and most of the associates will likely know what it is and what it means.

Survey employees

Much like customers, every CEO thinks he or she has satisfied and engaged employees. But in a similar fashion, you have to take the time to ask them if they are happy and what would need to change to improve their outlook. Grumpy employees rarely deliver exceptional service.

The employee survey is administered about every 18 months, often with a shorter, “pulse” survey at the nine-month mark just to get a quick gauge. This survey focuses on whether employees would recommend Heinen’s as a place to work, if they would recommend it as a place to shop, and they rate themselves on a scale of 1 to 5 on how proud they are to work at Heinen’s.

Ninety percent of employees said they were satisfied or highly satisfied to work for the company. While it’s vital for customers to be in the “highly satisfied” category; for employees, “satisfied” is usually good enough. Why? Because customers have far more options and an easier time switching companies than an employee does, and most employees only leave a company when they are dissatisfied with how they are being treated.

The survey also delves into other issues related to employee satisfaction, such as how employees feel about their direct report, whether they feel valued, if they have the tools and equipment they need, does the manager accommodate their needs, how informed they are, how well their supervisor coaches them, how their manager values their opinion and how much clarity they have in their job.

“When we get these back, if we find out, for example, that we’re not doing a good job of coaching and that our managers aren’t communicating regularly, and they don’t understand coaching, then we say, ‘OK, this is an area we need to invest in,’” Heinen says. “It’s about taking the information and learning and applying it and putting it into place and really looking to get better. That process, we’re very married to.”

He says that as much as they want to improve things and make associates feel valued, if the store manager doesn’t get it and doesn’t want to improve, then nothing will happen.

“At the end of the day, it’s about the most important person in anyone’s life on all surveys, and that’s their direct report,” he says. “So whether you love or hate Jeff or Tom Heinen at Heinen’s, the truth is, the most important person is your department manager if you’re an associate. It’s building the relationships with them and coaching them with an effort to helping them get better, and it comes back to being as committed to their success as your own.”

Throughout all of this, Heinen has learned that it’s a long process to get improved results.

“If you strategically decide you’re going to differentiate yourself in the people arena, then that means that it’s all about, No. 1, believing and trusting in your people and then starting the journey that we started, and it takes a long time,” he says. “If you expect to see great results in a year, it’s not going to happen.

“You have to know what you’re trying to achieve, but I don’t think you ever get to the destination. You can take Nordstrom’s or any other really well recognized company for highly engaged associates, and I guarantee you that they never stop trying to get better, and they never think they’ve reached a destination. It’s just the nature of the beast.”

How to reach: Heinen’s, (216) 475-2300 or www.heinens.com.