Chris Zane is founder and CEO of Zane's Cycles which has achieved an average annual growth rate of 23% annual since 1980 when it opened.
How?
"Zane credits his success to giving 'extraordinary customer service with the help of an empowered team of employees...The whole thing is about having a good time. Being positive. People have to be happy at work.' "
His book, Reinventing the Wheel: The Science of Creating Lifetime Customers, shares his story, his journey, to reinventing the wheel for his business and along the way creating lifetime customers over 3 or 4 recessions, three wars, 7 presidential elections....and achieved that stunning growth rate selling bicycles.
He shared an hour of his time recently to talk about his journey, his principles in leading his business, some stories from giving 'extraordinary customer service with the help of an empowered team of employees...having a good time.
You can listen here.
Chris, thanks for taking the time to be on the show!
My pleasure. And thanks for having me.
Thanks for writing a great book! You shared so many examples of what worked, a few that didn’t, what you’re thinking was in that process and how it connected with you, your customers, your competitors, suppliers. Excellent.
It’s all front-line practitioner kind of stuff that everyone can understand.
As I was reading this, I kept thinking that an entrepreneur with 5-10 employees who is looking for some immediately doable solutions backed with good logic and data ...would be able to open your book and find 5 or 6 things in the first pages of your book. You wrote it in the voice of someone who’s been there, accomplished that.
Tell us about this book. What inspired you to write this book?
For the last 15 years or so, I’ve had tremendous opportunities to go out and speak in front of groups about what it’s like to create a lifetime customers.
You know, we have a very different focus on what we do. We look at the lifetime value of a customer and we base our relationship on multiple transactions rather than a single transaction. So, we have a different way of looking at the relationship with our customers than most businesses have. And, even businesses that say “We’re all about creating lifetime relationship”...there are holes in what they say and what they do and the thought processes behind it.
I wrote the book, basically, it’s share tons of stories...what we did...the thought processes behind it...and then what the outcome is and how it was successful or it wasn’t successful.
You can look at each situation to ok, this is a great opportunity to do something, to try it, see if it works. Let’s see if we can show value to our customers and ultimately have them continue to come to our business.
My inspiration is people who want to become customer-service focused, customer-centric organizations, give them the tools to get there.
Excellent. Excellent.
My friend Erika Andersen coined a great phrase in her book, Being Strategic. The phrase is reasonable aspiration or hoped-for future. What was your reasonable aspiration or hoped-for future for writing this book?
Well, it’s completely unreasonable. But, again, you know when you’re an entrepreneur you’ll never look at limitations; you’ll look at opportunities at what potentially could come from stepping outside your comfort zone and creating some unique offering.
A friend of mine, Jim Issler, wrote an endorsement of the book and how this book is an archetype. That’s a pretty arrogant statement. But, at the end of the day, if the book has the ability to sit on people’s shelves, they learn from it and they move from transactionally-focused business to a customer-service focused business...that’s the goal I would love to see happen.
I’m involved in lots of organizations. I’m involved in Arizona State University’s Center for Services Leadership; I’m on the board there. We’re constantly looking at ways to improve the quality of service here in the United States.
And it’s really something that’s important to have available the tools for people to do the right thing to become a service-oriented business. That’s what I believe the book has the ability to do.
What metrics are you using to track your progress?
The metrics are the success that we’ve had.
You talk about the growth we’ve had, the 23% annual growth. It’s actually we’ve grown 23% a year since 1981. I started the business in 1981, when I was 16 years old and I bought the business from the previous owner.
Right from the start, that was the point of focus. I couldn’t compete on price because the other bike shops were larger. I couldn’t sell things for less than they could. I realized service-offerings were the most important things we had to provide to our customers.
We’ve grown at annual rate of 23% a year since 1981 right up until this year. It’s been consistent growth. It’s not a flash in the pan. Those metrics are recognizing that we can have strong double-digit growth forever is reason enough to stay on the path we’re on.
That’s fantastic!
Who was your audience? Describe the person you wrote this book for when maybe at some point you really wanted to be test-riding one of those new elliptical bikes?
They’re pretty cool bikes. They’re going to be game changers. As popular as the road bike and mountain bike are, I think the new form of elliptical bike which looks like an elliptical bike from the gym which you can use to propel the bike. And we’ve had some interesting success moving. People are really liking.
But, back to the book. The book really had two audiences. We’ve looked to expand our business to multiple locations around the country, understanding that there’s an opportunity out there and we’d love to see our business grow from the location we’re in now to having multiple locations around the country. Things tightened up with the economy and we’ve put that on hold.
But, during the process of writing the book, I wanted it to be a training manual for future employees show what the culture of the business is.
But it’s the entrepreneur, that guy that is struggling with how to be different and understanding what it takes to be different. You know, Zane’s did this but I can do this. I can’t cookie-cutter his ideas but that’s a great idea and how can I find a similar idea in my business to allow me to gain lifetime customers rather than transactional relationship.
Let’s talk a bit about science and lifetime customers. I'm an art major but even I know science is about creating a hypothesis and then testing and experimenting and judging the results to either confirm or deny that hypothesis. Where does that process play out in creating lifetime customers?
The simplest part of this understanding, and really when an ‘aha’ moment came for me and for the rest of my team came when we figured out what a lifetime customer means. Lots of of people are in the business of saying "we’re in the business of capturing 100% share of the wallet, supporting our customers for life and all this stuff. "
And what we did was we started by sitting down and thinking through ok, this bike is at 8 and this bike is at 12 and this bike is when you go to college, and this one is when you get married and then you’re mid-life crisis bike and your retirement bike.
What do all those transactions add up to be? And we looked at all those numbers without referrals, just the individual customer. We said if they’re going to buy all of their bikes from us we’re going to capture $12,500 in business from them. Subsequently, we work on 45% gross margin...so, that works out to $5600 in gross profit.
As soon as we realized what that number was, it changed the game. It became the reason we were in business. Our existence reason was to satisfy our customers so that every time they thought about what they needed associated with what we offer, then they would come to us rather than someone else.
And, if that meant taking it on the chin because there was a service thing that was questionable and he was riding down the road and hit a pothole and bent his rim and had to have it replaced...I could certainly push back on him to pay for that because I wasn’t riding with you that day.
But, at the end of the day I probably have that rim in the back. It costs me about $15.00. We replace the wheel and we send him on his way. He leaves feeling special and the investment in doing business with us was worth it and continues to support our business by fulfilling his needs with us.
So, that $5600 in gross profit is easy to relinquish if you know you’re going to capture that back.
Let's talk about your lifetime guarantee. You offer a lifetime guarantee for parts and labor. You touched on that just now. Walk us through the ROI on that because I think it’s important to understand those numbers.
Awright, so, let’s talk about the nuances of the bike business. And then we’ll talk about the service offering.
When I started in business, my competitors offered a 30-day tuneup. You buy a bike; you bring it back in 30 days; they tweak it to make sure everything is working correctly. And they send you on your way.
And from that point forward, anything the bike needs you have to pay for it at some labor rate which at today’s rates is $100-$150 an hour for labor.
What we did is we looked at it and said ok, we’ll throw in a year’s worth of free service. Because if we build our bikes correctly, they’re not going to need a lot of service for the first year. We can expand our warranties beyond what our competitors are offering from 90-days to a year.
And, then what I found is if you build it correctly, to do things to head off creative obsolescence or the need for paid service, then the bikes can go much longer than a year without needing any real service or any kind of adjustment.
I say that specifically if you tighten some loose spokes on a wheel that comes out of the box the wheel will never go out of true. If you lubricate the housings with a little bit of grease the cables will never rust and you’ll never need to replace them.
There are things you can do to offset the potential liability of service if your business is built on satisfying your customers with an extended service policy. Rather than not doing those things so that at some they’re going to have to come back and pay you to fix those things you could have offset prior to letting that bike go out the door.
So, then we went to 2 years free service when my competitors went to one-year free service. They followed suit because they saw their market-share diminishing. And then at some point we looked at it and said:
“You know what these guys are going to go to 2-years because we’re at 2-years. And we know that there’s not that many bikes coming bike at 2 years unless there’s a legitimate problem...so let’s go to lifetime.”
And we made it retroactive to everything we sold. Everyone knew they could come in and we wouldn’t nickle and dime they about the service.
And, again, it all came about at about the same time we realized our customers were worth so many dollars to us. Why would we ever want them to go somewhere else?
I remember I was at a conference in Sweden. Everybody there was talking about switching costs and how you hate to change your bank accounts and it takes so much time and energy and those are the switching costs that were built-in so you’ll stay with them. And I looked at them and said:
“Well, our switching costs are lifetime service. We don’t charge you to fix your bike. Why would you go somewhere where they charge you? And it allows you stay in front of your customers and continue to offer them the new things that continuously come out. Hopefully move them up the ranks in business. ”
So, that was all the process of lifetime free service.
At the same time we looked at the parts. And we said:
“Well, things break because they’re not manufactured correctly. If I go back to my supplier and say “Hey, here’s a derailleur or here’s a wheel or something that’s damaged that didn’t live up to its life expectancy. I need a credit for it because I’m going to give one to me customer for free.”
They follow suit because they see we’re doing enough volume with the and they say:
“You’re valuable to us. And if you offer this free lifetime parts we’ll back you on it."
So, now I’m not even out of pocket on this for parts that need to be replaced because the manufacturers realize we’re doing all this volume with them and they’re willing to support us.
Chicken and egg question. Which came first your lifetime guarantee for parts and service or your growth rate? Was your growth faster or slower after the lifetime guarantee?
It was definitely the service.
It’s funny. We’ve been doing this for 30 years and I can look over a cliff-of-service decision and jump and never worry about how to figure out how to fly before I hit the bottom.
But, early on, you don’t have that confidence. It takes a tremendous amount of time to be able to grow your understanding of the fact that not every customer takes advantage of every policy. So, that at the end of the day it’s not 100% or 0%. It’s some percentage in the middle that will allow you, some percent of customers will take advantage of the service offerings.
We started with the service and then we saw the growth. We continue to add service offerings and continue to see the growth. It’s become part of our organization, the core, to continue to find things to wow the customer, create customer excitement.
Because, it’s paying huge dividends over the long-term. At the end of the day, that 23% growth, that’s a hard number to keep going at the end of your 29th year.
At some point, it’s real money.
Yeah, it’s real money.
At the end of 1981, my first year sales were $56,000. We just closed our books on over $15 million in sales. It’s just continued to tick up every year, that 23% annual rate. And hopefully, we’ll hit $18 million.
Now, early on, when you began to realize the lifetime value of customers, as they moved through their phases of purchase and you went to your suppliers and said:
Hey, your part was broke, I’m going to replace it for free with the customer. You need to give it to me for free.
What was that initial conversation like? Now, they’d say “Well, of course. We’d be honored.” But in those early days what was the response?
Well, one of my greatest stories is my helmet supplier. You know we had a customer come in who had lost the buckle. There was nothing wrong with the helmet. They just lost the buckle, you know the buckle underneath your chin.
And we took the helmet and threw it in our warranty bin and gave the guy a new helmet. You know, he looked at us kinda strange and said:
“Really?”
And we said
“Yeah, yeah, we’re good. Be safe. Wear your helmet.”
Well, when my supplier came in he looked in the warranty bin and pulled the helmet out and he said:
‘You know there’s nothing wrong with this helmet.”
And I said:
“Yeah, I know it. But I need you to warranty because the guy lost the buckle.”
And he said:
“I can’t warranty a helmet because the guy lost a buckle. There’s nothing wrong with it.”
I said:
“Well, you really should. Because if you don’t, I’m not going to buy any more helmets from you. And, oh by the way, I’m not going to buy any helmets from you and I need $5000 worth of helmets. I can call one of your competitors and say if you’ll give me a $20.00 credit I’ll write you a $5000 order.”
And the supplier looked at me and said:
“I can write you a $20.00 credit for a $5000 order.”
And I said:
“Well, I knew you could.”
I know my customer is worth $5600 in profit. So, I can take a hit if I have to because long-term I’m going collect a lot of profit.
Same thing for my supplier. Right then we realized all we had to do was show and explain what our value was to them so that they could justify satisfying our situation and help us be more successful.
And ever since then, it’s not even a conversation. We just say:
“Here’s the deal. Write the credit. And oh, by the way, thanks for being generous with your credits. But, we’ll be loyal to you because you’re loyal to us.”
And that’s our relationship.
Who was more skeptical of your lifetime guarantee? Customers, suppliers or employees?
The people who were most skeptical were my competitors. It was actually awesome!
When I started with my bike shop there were 17 bike shops in New Haven county, Connecticut. You know, we need to start pushing back. And here’s a 16-year old kid trying to grow a business. And they all laughed and didn’t think we could get any traction.
And as we progressed and figured out the relationship with the customer and started adding these offerings, they just didn’t have any way of competing. They didn’t know what to do in order to compete with us.
One of the things I love is when my competitors offer the same free service policy we offer. But they don’t do it for the lifetime relationship of the customer. They do it to sell the customer standing in the store.
And when the guy walks in and buys a bike and then goes back in for free service ...there’s always a little loophole.
“This is covered but this isn’t covered. This is taken care of, but this isn’t. You’re going to be out of pocket for this, but not this.”
With us, there is no push-back. Lifetime free service is lifetime free service. Lifetime parts warranty is what it is.
We’re not trying to create all these barriers to get the customer frustrated.
Even when we’re on the selling floor I tell people:
“A lifetime free service policy isn’t to sell you this bike. A lifetime free service policy is to sell you your next bike. You’re going to buy this one. I’m going to take care of you; I’m not going to take advantage of you. And when you need something you’re going to come back to me because you trust me and you’re not going to go somewhere else.”
And even in the industry, there’s guys all over the country, when this article was published in INC by Donna Fenn, it explained this whole process of what we do. We had all kinds of dealers writing in to trade journals saying:
“You never give away something you can charge for. This guy’s a knucklehead. He’s going to be out of business.”
Subsequently, we’ve continued to grow. And there’s quite a few of these guys in the bike business who recognized the value of this lifetime free service and are following suit.
But it’s not the norm in the industry. Our profit margins are very high. Our growth is very high. It’s certainly working for us.
Now back in the day, the Big Three carmakers back-in-the-day financed their global multi-billion empires on a business model where a majority of their profits came from car owners buying replacement parts. But, you sell bikes and offer a lifetime guarantee for parts and labor.
What’s in your DNA that helped you see this when all these smart guys, these MBA-types, failed to see it?
Part of it is being front-line, having a one-on-one relationship with them and listening to their needs, fulfilling their needs. There’s a lot to be understood by understanding your customer, feeling the pulse of your customer.
I love the example of the car industry. It’s a great example of what they didn’t do that we did. And had they done it, they’d probably be in much better shape.
GM reorganized. Chrysler was bought by Fiat. Ford kinda gets it.
But, there’s lots of companies like Hundai, Kia and these little ancillary companies that came in with these extended warranties and not out of pocket warranties that the customer could make a single investment and trust that they made a good decision.
And look at the market-share that they’ve gained. And, just the fact that these guys were in the business of selling parts and not lifetime relationship with their customers and these guys have actually gone away and they’re not even being run by the same people who ran the company 25 years ago.
When you shift your thinking from transactions.
“We made a profit on this deal. We made a profit on this deal.”
That diminishes because a customer will switch if they find a better opportunity.
Where if you’re consistently focused on satisfying the needs of your customer and doing what’s best for your customer and trusting that they will be loyal to you...then you can grow your business on good products, good service and good profits for your company.
That’s such a simple value. People will pay for value. People will pay for trust. And when you don’t that’s when they turn the conversation.
My wife and I bought a new car this summer. And everything’s covered. Well, maybe not the tires. But everything in the vehicle is covered.
And, it was an easy decision. What you’re paying you’re paying for 4 years. I know I’m not going to have to pay to change the oil or do anything else. I can go back to the dealer because I don’t feel like I’m being take advantage of with whatever the dealer pricing might be.
And hopefully, over time, after 3 or 4 years I’ll have a trusting relationship with them so I’ll want to continue a relationship with them so when I need to buy something or I’m out of pocket for some of the relationship that needs to be done. At least they’re giving me an opportunity to try to figure out if I should trust them rather than immediately go someplace else.
That’s the attitude of everybody else because they don’t trust their provider. It’s been a bad model for so long that we’re seeing the tide turn a little. That’s the passion that we have. We want to change the tide across lots of businesses because it’s really the right thing.
My friend Len Barry wrote a book called Discovering the Soul of Service: The Nine Drivers of Sustainable Success which had this quote:
“Good service not only improves business but it also improves the quality of life.”
You know people who work with me are happier. They’re empowered to do what they have to do. Customers are happier because they know they’re not going to be taken advantage of; they’re going to be taken care of.
What’s the push-back? There no anxiety. You’re going to do what’s right for the customer and that’s that.
Beautiful. Beautiful. It’s a delight hearing that from you.
There’s an exception to every rule. And you touched on it just now. And you have one with your Lifetime Guarantee. What is your one exception to your lifetime guarantee?
Tubes. Flat-tires are an exception. You know, we’re not riding with you. If you get a flat-tire, you basically are going to be out of pocket for it.
But, we started a policy where for a single investment of $20.00 if you get a flat-tire you can bring it back to us and we’ll fix it for free forever. The tube costs a couple of bucks and labor’s pretty quick and easy to do.
So, if somebody wants to make an investment....it costs about $12.00 to change a tube if it’s not one of our bikes and covered by this insurance policy. So, basically, if you buy two flat repairs forever we’ll replace and change your tubes. And then you’re covered.
It’s a profit-center for us. I’m not going to hide behind that. The $20 is based on future liabilities. We know that some people get lots of flats and some people don’t. But at the end of the day, ultimately it’s a quality offering, it’s an investment and they’ve covered for 100%.
Let’s say even if it wasn’t a profit center they have to walk through your store. And you’ve set it up where they have to walk through your store, have a free cup of coffee at your espresso bar. Re-establish the relationship, remind themselves of what a great store you have.
That’s exactly it. We know what we do well and what we don’t do well.
One of our failed service-offerings was telling people who bought bikes that we would pick it up at their home and return it to their home. No charge. We did this for a couple of years and we sold a few thousand bikes that had this pick-up and delivery service.
And what we found was that it was detrimental to our business. Customers weren’t coming in the door. They weren’t smelling the rubber and the coffee. They weren’t getting an emotional connection to the business. They literally had the bike in their garage. They’d call us and we’d pick it up and they never had a chance to buy a power-bar or a new GPS speedometer for their bike.
So, we actually abandoned that service.
But, the thing I like to promote and the the thing I like to talk about with folks is.... we didn’t abandon it to the people we promised it to. We just stopped offering it to the people who came in. So, when someone calls us up and says “Hey can you pick up my bike.” we go into our database and realize they bought it in the window of time where we offered free pickup we go and pick up their bike and delivery it to them. It’s not a big deal.
People after and prior to that offering, they don’t have that luxury because it doesn’t work for us to stay profitable and continue to grow. So, they have to physically come in and visit our business. We will continue to service them for free.
Fantastic. Fantastic.
Let's talk for a minute about partners and customers, vendors and suppliers. There's a lot of talk with some good basis that customers should be brought into the fold, treated more like a partner. I've said it; I’ve championed it.
You write something different. You write, as you speak, directly and candidly, that with your vendors and suppliers you're their customer, not their partner. Why did you choose to draw this line?
Yeah, I’m pretty passionate about it. I promote it to them in our conversations.
You know, when my customer calls me with a need and I recognize that I have the opportunity to profit from the relationship I treat them well and I work to try to entice them to continue to do business with me.
Unfortunately, when the partnership thing comes up that becomes a different situation. Your partner is your wife or your husband. And sometimes you mistreat them. Because they’re your partner and you’re in this commitment, then you forgive them and you move on. But, at the end of the day in a business environment they’re not really partners unless they’re paying your rent or paying a part of your electric bill or paying for your people who work there. That’s what a partner is involved in.
A vendor supplies me goods and I buy them from them because they offer me a reason. They service me; they give me quick delivery; the price is competitive; they stand behind the warranty.
Whatever it might be, they earn my business as a customer or supplier relationship and not a partner relationship. Because, at the end of the day, yes, I value the idea that they bring product to me that people want to buy. But they don’t have, they’re not on the financial hook for the expenses of the business. So, they’re not a partner.
And I want them to treat me like a customer so I can treat them like a customer and not try to convince them that they are my partner and sometimes ask them for forgiveness.
Great answer. It keeps everything simple and clear, out in the open.
One of the many reasons I liked your book was Chapter 4. There you talk about giving back to the community both from a philanthropic point of view as well as from a pragmatic, customer-loyalty view. Can you share with us some of those programs and your plans for Zane's Foundation?
Yeah, we have a Zane Foundation. Zane Foundation is an organization I started 20 years ago. I looked at the opportunity in the marketplace and said:
“There’s not a lot of people, there’s not a lot of businesses, supporting education and the arts.”
You know, we’re in the bike business; we’re not in the arts and education business.
But I felt that in order to drive value to the community, if we consistently supported arts and education offering scholarships to high school students as they graduate and supporting all of the arts programs that go on in the community unrelated to our specific business. We sponsor bike rides and we’re the title sponsor of a couple of different triathlons and we do a kid’s triathlon and we’re engaged at the non-profit level supporting a lot of different things.
But, the Zane Foundation was specifically to make a mark in the community to show that the business cares about the broad scope of the community and not just supporting our own endeavors and not just being connected to the bike side of our business.
Now, it’s well over $100,000 in scholarships for students in the community we’re in, as well as, lots of other stuff that presents itself as requests for contributions.
And in the community, too, we look pretty seriously at over the last 29 or 30 years we paid out over $29 million in payroll to people who live in the community who then shop in the local hardware store and buy groceries and dry-cleaner and coffee shop.
We look at that as part of our community support as well. The money isn’t disappearing. It’s staying in the market as well. The money flows in the community and it’s an important part of what businesses, specifically small businesses do in the community. They drive great revenue in the community.
Employee engagement is a hot topic these days. That's because most companies lack it. And those companies with it are growing and hiring. Coincidentally we're in a jobless recovery. I'm thinking to do what you do must require a lot of employee engagement. New ideas, new roles, new tasks...disruption, some things work, some don't, lots of growth....
I'm thinking in some respects you're hiring entrepreneurs, those who are comfortable with risk and change and failure. What do you look for when you hire?
The thing that I look for specifically is nice people. One of the things that I’ve found over they years in hiring and firing and making good decisions and bad decisions with staffing is when you meet somebody and they look you in the eye and they’re outgoing and they’re confident. You enjoy the interaction right from the start. Those are the people you want to have in your organization.
And if you build an organization with those kinds of people it brings itself to be an even better environment. People are nice; they get along; they enjoy working together.
And then, when you empower your employees to do whatever it takes to satisfy your customer. And that’s a single mantra within our organization is to take care of the customer so that they’ll want to come back.
And, that the customer service starts when the customer experience fails. That’s another thing we talk about pretty openly in our organization: If the customer doesn’t complain it’s because they’re having such a good time and you’re empowered to say yes and do whatever they need to do....then we don’t have to go through the recovery process or the apology process. They just had a good time when they were here and they want to continue to come here.
Those are the types of relationships that we like to create with our employees and giving them the ability to do the right thing for the customers. Once you find people that fit together it’s easy to continue to add people that fit together. Because during the interview process and the interaction with multiple people as they interview....you don’t interview with just one person. You have to get the nod from a couple or three people who appreciate what the person’s bringing to the table as a new employee.
“They’ll fit in. They seem like they’re nice.”
Or they’re a friend of a friend. We tease our summer interns, our summer staff, that when they leave to go back to college they need to give us the names of one of their friends we can hire or they can’t leave. They’re stuck in the store until they find their own replacement.
Typically, they bring in someone who fits, rather than undermining the organization. Because they know they’re going to come back over Christmas or over spring break.
A lot of engagement at that level where you’re part of the family, you’re part of the club, you’re part of the group, let’s make it better.
What percent of your ideas come from your employees?
At this point most of them.
My responsibilities in the way that the business has grown is I’m not required or accountable to the organization on a daily basis. I have a Retail Manager, a National Sales Manager, an Operations Director. These guys are all responsible for running the different divisions of our organization so I can go out and find new opportunities and focus on growth and brand-building.
The ideas that have come about in the last few years have been promoted by the staff saying:
“I saw this. And it looked interesting. Is there a way for us to adapt it to us so that it works.”
When we talk about our 90-day price protection policy...and the lifetime service warranty and the lifetime parts warranty the customer assumes they’re paying a premium. So, in order to get our customer comfortable with the fact that they should make an investment with us we offer 90-day Price Policy. So, if you buy it from us and you see it anywhere in Connecticut for less within 90 days, let us know and we’ll refund the difference plus 10%.
That was a BestBuy policy 15 years ago. We looked at it read it, and realized we could do that. And we, basically, cookie-cuttered that policy and turned it into our policy. They had a 30-day and we turned it into a 90-day because we realized the liability was low.
Now that’s how we move forward now. People just bring stuff in and say:
“This might work. Can we challenge this to see if it’s good idea or not a good idea?”
It’s a collective group of like-minded individuals that want to succeed at this model. And everybody’s open to new ideas and trying to figure out if there’s a value or not.
And another thing. It’s like the bike-delivery thing. You can start things and if they don’t work you can abandon them. Just as long as you live up to the promises of the people you made them to. It’s not that it’s engraved in stone. You can manipulate the offering until it works for your organization. But, you need to try something.
I’ve had people who’ve worked for me. And the ship’s on the dock. They’re trying to manage the course they’re going to take and account for the weather. And they never leave the dock.
My attitude is get the ship out on the seas and let’s figure it out as we go. And, as long as we don’t capsize, we’ll get where we need to go a heck of a lot faster than those who are afraid to let the boat leave the dock.
I have the confidence that I can manipulate or manage the situation while I’m in it in order to be successful.
What happens, if it happens, when they hear your idea and think it stinks? Likewise, with you and their idea?
Well, it happens.
Fortunately, we’re like-minded and we’re also comfortable with one another. We’ve been around one another that none of us have thin skin. And if I come into a meeting to present a concept and I can’t defend wholeheartedly then it does stink. I haven’t done the homework.
I talk about the interview I saw with Marc Zuckerberg where he said if someone comes in with a new idea they have to build it and then they can show it him in real-time.
That’s kind of how we are with the policies and service-offerings. If you haven’t figured out how to make it work and you’re looking for someone else to carry the burden of this great idea, then it’s not a great idea. If you can’t sell it and convince folks that it’s really good, then it should go by the wayside.
One of the policies we just implemented from one of the guys in the organization was at Christmastime was when we get returns. Tom said
“What if we offered a premium to customers if they would take gift card?”
Now, of course we’ll give cash back. Our unconditional return policy says you can return anything to us for forever and we’ll always give you your money back. But how about we give them 10% kicker on their return? So, if they want to buy a bike in the spring or a different piece of spring clothing and the spring clothes haven’t come in, so there’s a benefit to them from just getting cash back.
And there’s a benefit to us. We can keep the cash in the company during the winter when the sales are slow. And the customer gets a premium on their value when they’re ready to make a buying decision. And they remain loyal to us.
We saw a pretty nice offering at the holiday there where we had about $15,000 in returns that came back with customers taking the 10% to continue the relationship with us and to get a better value when they want to make their buying decision.
That’s the kind of thing where Tom presented it. We challenged it. It made a lot of sense. And we started to move on it and everybody’s loved it since. So, it seems like a permanent policy moving forward.
That leads us to our next question. You have a theme or principle in your business called Point North. Now, not every employee, even your brother, has the same zeal for happy customers you do. How do you, not keep them in line but maybe align and re-align their actions and interactions towards your commitment to customers?
The “Point North” model is a pretty interesting one. If you think about...you’re in a room full of people and everybody closes their eyes and points in the direction they believe is north. And if you open your eyes and look around you can assume not everybody in the room is pointing in the same direction.
And, subsequently, our business needs to continue in the same direction with the same attitude.So we use this “Point North” model as basically a simple, slogan, or expression we have in our business to remind us that the only difference we have in our business between us and our competition is the service that we offer.
I’ll say that again:
“The only difference between us and our competition is the service that we offer.”
And what happens is everybody knows that. And actually there’s a little plaque in the building and we call that North. And so, if we see an interaction with an employee that’s becoming heated or we see a customer who for whatever reason is challenging our existence and potentially being unreasonable and the employee starts to get a little uncomfortable with the direction they need to make, the decisions to satisfy the customer...we can walk up to them and without interrupting the conversation, I can say to them “Point North”. And immediately they know it’s the only difference between us and our competition is the service that we offer and that’s what I need to do. And then they’re redirected to do the right thing.
As long as we’re all moving in the single direction, there’s no inconsistency in the relationship with the customer. They can interact with me. They can interact with Tom or Greg. And it doesn’t matter because they’re going to get the same attitude.
And I think that uncertainty in business is why people choose to go somewhere else. You go into the dry cleaner and one guys really nice and one guy has a chip on his shoulder. Or one guy cares you want your collar tabs back and the other guy doesn’t. Eventually, you’ll go:
“Ah, let me find another place that’s better.”
And we’re tying to have this consistent relationship with the customer where again the customer service starts when the customer experience fails. Keep the customer service experience positive and we don’t have to do the hard work.
That’s such a great, simple, mechanism to remind people without making a big production about it: “Point North”.
Yep.
Zane's Cycles is an international company in that you celebrate Bastille Day...
Well, of course! Doesn’t everybody!
Tell us about that decision to celebrate the French Revolution annually.
Well, it happened that THE Bastille Day happened a few years ago and Tom my Operations Manager came up to me and said I’m going to close the store a little early. And Bastille Day is July 14th and it’s probably one of the busiest weeks of our year.
He says:
“I’m going to close the story at 3 instead of at 6:30. We’re going to get a bus and we’re going to take everybody up to an Amusement park. We’re burnt. We’ve all been working hard. ”
Our season kicks off the middle of march. And it had been 3 solid months of 10-12 hour days. There was a need for us to refresh our batteries and recharge.
So, he said:
"We’re going to close a little early. And, we’ll put a little sign on the door for the customers and explain we closed a little early. We’ll give them a 10% kicker tomorrow as an inconvenience. Come back tomorrow; tell us you came here today and we’ll give you 10% off your purchase as an apology for us inconveniencing you and not being here."
And I kinda shook my head. You know, I guess, you know it’s probably not in all the business books that you should close your business. But, again, the quality of my people is way more important than anything else that we have. If they’re burnt and we need to refresh then let’s do it.
We did it.
And again, Bastille Day just happened to be on a Wednesday. So, we said on the sign
“In Observance of Bastille Day we closed early”.
It was just kind of a fun thing.
Now, we just typically close early on Bastille Day and go up and do something, whether it’s an outing like paintball or something or we go to the amusement park or whatever. But it’s a refresher day in the middle of our highest season that gives everybody a chance to kickback and remember the fact we’re not just all about the profit we’re making or the business that we’re promoting.
In simplest terms, and it’s a hard thing, we’ve had interactions with customers where they’ve been billigerent or taken advantage of a situation to the point that’s been unreasonable and we’ve canned a customer for being unreasonable. But, at the end of the day, my employees are by far are the most important asset I have. And, at the end of the day if my employees are unhappy and they’re not going to come to work then I have to stand there and do the work. We’re obviously at the point where we’re too busy to do it: one man can’t run the operation.
My focus at this point is to engage the people in the business and see value in them being there. And if we have to close early to do that then that’s the right thing to do. It’s not a hard decision.
You've created very high expectations with your customers. You've beautifully fulfilled them as you continue to grow. But life's not perfect and neither is everyone at Zane's. Though, it seems might close. But your expectations leave little room for error. One little one and the tide turns into a tsunami of...customers going around say Yeah, we knew it couldn't be true...How do you deal with the inevitable screwup? People forget something, forget a promise to an important customer. How do you deal with that?
Let me tell you, it happens. It’s unfortunate that it happens; but it happens. Nothing is perfect all the time.
How you handle that is what challenges all the other things that you do. You can recover a customer after a mistake. You can apologize and do what it takes to make them feel valuable and understand that you truly made a mistake. And have them want to continue to do business with you. That’s the relationship that drives all the other things that happen.
We have this great story about a customer who’s Valentine Day, we call it The Valentine Day Massacre. We had a customer who came into the store who put a bike on layaway because she couldn’t afford to buy the whole thing for her husband for Valentine’s Day.
So, she put down some money and said:
“I want to bring my husband by after you’re closed and show him the bike I’m buying for him. And next week, when I get my paycheck I’ll come by and pay the balance of it.
If I put balloons and a message and a card on the bike, will you put in the window of the store. So, when I come by tonight with him, I can show him the bike.”
Great idea.
At the end of the day the goal was to take the bike put in the window of the store, lock up and go. So, when she comes by it’s in the window.
Well, of course we forgot.
The next morning I get a voicemail from her and, you know, she’s upset. Actually, she’s really upset. She’s really ticked. She’s like:
"You wasted my time. You wasted my valentine’s day night. I went to the store, I wanted to show him the bike. I sent him out of the car to look into the window thinking the bike was going to be there with my note and there was nothing there. And oh by the way some of my co-workers actually showed up in the parking lot to see his response him seeing the bike he was going to get. I was embarrassed because they were standing there looking and wondering what’s happening."
We were embarrased. We killed two cupids. It was a long voice mail. And I called Tom and I said:
"What’s the deal with the bike?”
And he says:
“I know. I got into work this morning and it wasn’t in the window. Greg was supposed to put it in the window cause he was the one that worked with her. And it just didn’t happen. And I got a voicemail from her, too.”
And I said:
What are we going to do? We gotta make this right. Let’s sit down and think through this and figure it out.
She owes half the price of the bike. We can certainly forgive the balance and get the bike to the husband tonight to make up for it and so he can have the bike.
I’m like:
Yeah, that’s easy to do. But, what else can we do to make her feel special? We screwed up and we want her to know that we’re really apologetic for the situation.
Well, why don’t we re-create the Valentine’s Day Dinner? We’ll call up Quattro’s and let ‘em know we have a customer coming in and let ‘em get a bottle of wine, nice dinner. We’ll cover the cost of the dinner. By the way, we should probably cater lunch for all the people who came to see this. They don’t like this either because we wasted their time, too.
And he said:
Yeah, that’s a good idea, too.
Ultimately we went through the whole process and got the gift certificates and told her we were going to come over and drop the bike off and he apologized over the phone. And she seemed to calm down a bit.
And we went to the house and gave the bike to the husband and gave her the certificates for the dinner and for the lunch. I should have saved the voice mail. But he called me and left a voice mail after he left their house and said:
“Dude. She kissed me.”
So, we went from the morning where she hated us, despised our existence and hated our time because she went through this thoughtful process to something nice for her husband and we were the reason it didn’t come about. So, the fact is she’s kissing my manager because we stepped up and did what was the right thing to do.
It could have been easier to say:
“Hey man. We made a mistake. Mistakes happen.”
But that’s not what we do; that’s not what we’re about. When we make a mistake, we apologize and we’re willing to do whatever it takes to satisfy the relationship so that it becomes a great story for us. And the customer knows it’s a great story for them because we really do care about them.
The best part of the story was 3 days later I get an envelope with a letter from my employee, Greg. He was the employee who worked with this woman and in there was this really nice letter saying:
“ I apologize for making a mistake and I potentially cost us a lifetime customer. And oh, by the way, here’s a check for $400 to cover the costs of all the stuff we did for this woman to satisfy her as a customer.”
Now, of course I didn’t cash the check because we all make mistakes. And Zanes can afford to pay to fix the mistakes our employees make. I want my employees to feel that they can do whatever it is they need to do. But, to have an employee take a week’s pay out of his existence, to write a check, to cover the cost of his mistake...that’s an employee I want working for me.
Actually, he’s still here. Greg’s going to be a lifer. He gets what we’re about and he wants to make this a greater organization.
I just looked up and we’ve come to the end of our hour. The time has just raced by. I thoroughly enjoyed talking with you. I know you’re crazy busy and a million things waiting for you.
You're a leader. Leaders are readers. Jim Rohn says that; I just quote him. On your website, you have a page where you have a recommended reading list. One of them caught my eye. The Offshore Nation. How do you offshore or outsource your customer experiences? Where do you draw the line in that dynamic?
I certainly believe that readers are leaders. One of the reasons I promote this book on my website is because we all need to know what is out there and what’s changing.
There are a lot of books out there that are talking about looking at the global economy. When you look at the US economy as whole, we’re not in the manufacturing business, we’re in the service business. IBM is spending time promoting that you’re going to get an academic degree in service management or service science like you can get a degree in service science.
People need to read books on potentially what’s happening out in the marketplace, or the world, that will challenge our existence to be successful.
And The Offshore Nation is a great book to know what is potentially coming down the line.
Where can we find you on the web?
We’re at Zanes and I’m at Chris Zane. Those are the two main places we have to visit and give us feedback. Good or bad. I’m a customer service guy, so it doesn’t matter.
Thank you so much for a wonderful conversation!
WARNING: Self-Promotion.
If you want to know more ways to engage with your employees as opposed to anonymous surveys, my book RECOGNIZE THEM: 52 Ways to Recognize Your Employees in Ways They Value offers 52 ways to recognize your employees, easy exercises to reinforce those habits and skills and inspirational quotes to keep you going.
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