Profile of a software company whose quality and superb customer service result in word-of-mouth sales.
Profile of a software company whose quality and superb customer service result in word-of-mouth sales.
Customer Service:The Last WordPicture this. The products you bring to market are direct hits with your customers, higher in quality and lower in price than your competitors', and completely and flawlessly supported after the sale. A small company's pipe dream?Not if you're Intuit
This past February, on the day postal rates jumped from a quarter to 29¢, I visited my local post office. So did a lot of other people. Not that anything was different there. The clerks had still opened only one window out of a possible three, thus creating a line that was 10 deep. And the one guy on duty had run out of 4¢ stamps.
OK, so the post office hasn't yet discovered customer service. But every other organization seems to have gone nuts over it. Hotels virtually beg you to fill out those little cards telling them where they messed up. Retailers trumpet their money-back guarantees, manufacturers their toll-free numbers. (Questions? Complaints? Call 1-800-WELOVE-U.) Banks -- banks! -- stay open later and promise no-hassle loan applications. Or at least they did before they quit lending money.
Most companies, of course, stop right there. They want customers to feel fawned over, but they rarely seem to care whether those same customers actually go away happy. My health club, for example, uses the ubiquitous tell-us-how-we-can-do-better cards. But do the people who run it really need me to tell them the rowing machines are busted half the time? And if they cared about customer satisfaction, as opposed to the semblance of customer service, wouldn't they just fix the damn machines?
The fact is, the icons of customer service -- 800 numbers, guarantees, suggestion cards, and surveys -- have become no more than a ticket of admission to today's marketplace. They no longer confer a competitive advantage; indeed, they may even be liabilities. (Customers who get curt responses from that toll-free line will be madder than if they had never called.) They cost money, and they don't deliver commensurate benefits.
And yet, as long as we're on the subject of customer service, let your imagination run wild. Suppose your company could really satisfy its customers. Suppose you could provide a product or service that was better than they expected, for less money than anybody else charged. Suppose that every time you brought out something new it was just what buyers wanted. Suppose your after-sale service was so good that customers with problems went away feeling better than before.
What would happen? Easy -- you'd own your marketplace. People would buy from you over and over again, would relish the experience, would never even dream about doing business with anybody else. They would proselytize on your behalf, telling their friends and associates to buy from you. You'd hardly need salespeople.
Impossible, you say. Farfetched. Then again, you haven't met Scott Cook, and you probably don't know much about his company, Intuit Inc. All those statements apply to Intuit. Better yet, Cook has figured out how to build that kind of customer orientation into the organizational bricks and mortar of his company.
"Operating without a safety net," the 38-year-old president calls it. Or "the Toyota approach." Or simply "getting it right." Whatever -- it's partly a matter of management techniques, partly a matter of fundamental philosophy. And it's what sets Cook's company way, way apart from the competition.* * *
Intuit makes microcomputer software. Its flagship product is Quicken, a program that allows consumers and small businesses to write checks and keep track of their finances on a personal computer. Owning the marketplace? Quicken is probably the most successful personal-finance program ever written, holding a market share estimated at 60%. "It has become the brand-name product in what would otherwise be a commodity business," says Jeffrey Tarter, editor of the industry publication Softletter. "It's the Kleenex or Xerox of its market." Intuit, accordingly, has been exploding. It ranked #15 on the 1990 Inc. 500. Revenues last year hit $33 million, up from $19 million the year before. After-tax earnings were into double digits.
Granted, the software industry has always been populated by hotshot fast-growth companies. But Intuit doesn't fit the conventional mold. Unlike, say, Lotus, it started without venture capital or other early advantages. (See box, "Wager: One Company," page 5.) Unlike VisiCorp or Wordstar, it has dominated its marketplace through several generations of software, beating back waves of would-be competitors. Consumers yank Quicken off the shelves virtually unbidden. Intuit sold close to a million units in 1990. Its product is carried by retailers all over the country, by Target stores and Wal-Marts as well as computer chains. Yet the company's sales force numbers exactly two.
So what moves the goods? Asked that question, founder and president Scott Cook peers mock-earnestly through his thick glasses, allowing only the hint of a grin to cross his face. "Really," he says innocently, "we have hundreds of thousands of salespeople. They're our customers." Suddenly missionary-sober, he adds that he wants his customers to be "apostles" for Quicken. Intuit's mission is to "make the customer feel so good about the product they'll go and tell five friends to buy it."
And as to what would make a customer feel that good, which is to say better than most customers feel about any product or service -- well, the only way to understand it may be to watch Cook and his company at work.* * *
The year is 1984; the place Palo Alto, Calif., not far from Intuit's current hometown of Menlo Park. Cook and three colleagues are in a room with a bunch of computers and several well-dressed women. The women -- members of the Palo Alto Junior League -- are not what you'd call computer nuts; some have never even touched one of the machines before. But today, after croissants and orange juice, they are sitting at the keyboards, trying to use the computers to write checks. Cook and his colleagues watch but don't help.
Cook -- a Harvard M.B.A., a Procter & Gamble-trained marketer -- is a bit on edge. In a way, his fledgling company depends on what he learns here.
His epiphany, a year or so earlier, was simplicity itself. More and more consumers and small businesses were buying PCs. All those computer buyers wrote checks and kept financial records. Outfitted with the right software, a computer should be able to automate such tasks. The only rub: a few dozen check-writing programs were already on the market, and Cook had no money to elbow them aside. If he wanted to start a software company -- and he did -- he would have to offer customers something his competitors didn't.
Wondering what that something might be, he and a newly hired assistant began placing telephone calls to middle- and upper-middle-income households. They didn't stop until the calls numbered in the hundreds -- and until they began hearing the same responses over and over.
The vast majority of respondents said they did financial work every month, they didn't like spending so much time on it, and they would consider using a computer to do the work. But they couldn't be bothered with learning a complex program, and they certainly didn't want to spend more time on the chore than they were spending now. Curious, Cook assembled a panel of computer buffs to test the most popular programs then available, writing checks and keeping records first by computer and then by hand. Sure enough -- in every case, the computer was slower.
Conclusion: there was a market out there, already big and undoubtedly growing bigger, a market capable of appealing to Cook's P&G-honed aspirations. But if he wanted to reach that potential mass market, his program had better be fast, cheap, hassle free, and above all easy to use, so easy that anyone could sit down at the computer and start writing checks.
So, now he's watching very intently as the Junior Leaguers stare at the unfamiliar keys. He and his chief programmer, a recent Stanford graduate named Tom Proulx (rhymes with true), have developed a prototype, and today's trial is one of many to see how well they've done. If the women flunk, so does the program.
For a while the test goes swimmingly. The women hunt and peck, but they don't have much trouble selecting "write checks" from a menu on the screen. The outline of a check appears, and the cursor jumps neatly from date to payee to amount. Anyone who has ever written a paper check, they discover, can write one with this new software. And the computer's check register looks just like an ordinary checkbook.
Then, alas, they go to print the checks they've written. Cook and the others have loaded up the printers with specially prepared checks, and the testers find "print checks" on the menu. But the first check prints too high, or maybe too low. To a woman they fumble with the printers; to a woman they make the problem worse. What's the matter with this computer? The checks just won't line up right.
Cook cringes. So does Proulx; so does Tom LeFevre, another colleague present at the creation.
"We knew one thing," recalls Proulx, now the company's vice-president of product development. "If people had that much trouble the first time they used the program, they'd never use it again."
"Scott looked at Tom and me," adds LeFevre, also a vice-president. "He said, 'You guys figure out a way to solve that problem.' His tone said, And don't come back until you do."* * *
Jump cut: 1990. Proulx and Lefevre have long since resolved the alignment problem, developing a fancy bit of programming (patented and still unique in the industry) that makes the computer line the checks up automatically. And Quicken has long since been released, upgraded, and released again. It has climbed to the top of the best-seller charts; it has won industry awards. Intuit is making a lot of money selling not only the programs but upgrades, special checks, and other supplies.
Yet now Alex Young, a product-development manager for the next release of Quicken, is sitting in the home of a man he doesn't know, watching him open a shrink-wrapped box.
Maybe it was the P&G training, maybe the lesson of the Junior Leaguers, maybe just the impact of the original market research. Whatever the reason, figuring out how to satisfy customers has become Cook's, and Intuit's, obsession. The company runs an annual customer survey, asking which of Quicken's features buyers use and don't use, like and don't like. It polls dealers anonymously, asking what personal-finance programs they recommend and why. It compiles data from customers who call in with problems or write in with suggestions. It runs focus groups, usually consisting of people who aren't Quicken customers but (according to Intuit) ought to be. Information from all those sources flows directly to product-development teams (working on the next version of Quicken), to the documentation department (which regularly updates the manual), and to marketing.
The company also tests its programs relentlessly. And not just the so-called alpha and beta testing commonly practiced by most software companies -- tests that are designed primarily to locate bugs in the programming -- but tests at a much earlier stage of product development. Get in some experienced Quicken users -- see if this new version is going to confuse them in any way. Get in some Junior League-style novices. What's their reaction to a certain screen? "You watch their eyebrows, where they hesitate, where they have a quizzical look," says Cook. "Every glitch, every momentary hesitation is our fault."
Enough, you might think. That'll do it, you might think. Not that all the research costs so much -- only the big sample surveys represent much of a cash outlay, in the neighborhood of $150,000 a year. But surely Intuit has been finding out all it possibly can about its customers' experiences with the product?
Nope. "There's still a group of people we were missing," says product manager Mari Latterell. "People just setting the program up. In fact, we didn't really know how easy it was to get started with Quicken. When you survey customers, they've been using it for six months or a year and won't remember. When you bring in testers, you have them in an artificial situation. They aren't entering their own data in their own homes."
Which is why Latterell, imbued with Cook's market-research mission, proposed the Follow-Me-Home program, in which Quicken buyers from local stores are asked to let an Intuit representative observe them when they first use Quicken. And why Alex Young, who volunteered to participate, is now watching his new acquaintance unwrap the shrink-wrapped Quicken box.
Today Young will spend five hours with his subject, longer than any of the dozen or so other employees who have so far followed customers home. Sitting behind the customer, he watches and listens. Customer confronts the program's main menu. (Confusion, notes Young: he thinks the word register, meaning the check register, has something to do with the product-registration card.) Customer begins to enter data from his checkbook. (Problem: he tries to enter a balance manually. You can't do that; once the opening balance is entered, the program calculates the balances automatically.) Customer tries to print checks. (He prints more samples than he needs to.) Finally, the day is done, and the customer is happy. As part of the deal, Young is now allowed to offer a little help and advice.
Young and Intuit, for their part, have their payoff: a thick sheaf of notes on the myriad ways that the next incarnation of Quicken, already the most popular program on the market, might be made just a tiny bit easier for first-time users.
"If people don't use the product," observes Tom LeFevre, "they won't tell their friends to use it, either."* * *
Suna Kneisley, senior customer support specialist, can't quite believe the fax. A customer she has just spoken with wants to know how to put his various records onto Quicken and has just faxed her nine pages' worth of data. It's a Friday; no way she can go through it all today. Oh, well. She calls the customer and leaves a message: she'll take it home with her over the weekend and get back to him Monday. Monday, she has the answers he wants.
Technical-support reps such as Kneisley are Intuit's front-line employees, like waiters in a restaurant or reservation clerks at an airline. There are 40 of them, almost a quarter of the company's 175-person work force. You've just bought a new printer, and you can't get it to work with Quicken? Call tech support. You've damaged a disk and lost some data? Call tech support. The response you get, of course, will define your attitude toward Quicken and Intuit, probably forever.
So ask yourself: How much is it worth to the company when a customer gets a response like Kneisley's -- not only that she'll answer a request going well beyond the ordinary, but that she'll take it home and work on it over the weekend?
Kneisley, 24, has been at Intuit only five months when this particular request comes in. No matter -- she has already absorbed the messages that Cook has somehow built into the very structure of his company: Intuit stands or falls with what happens in tech support. Do whatever you need to do to satisfy the customer. The messages are hammered home in several different ways:
* Thank-you letters from customers are read aloud, circulated throughout the company, and then framed and posted on the wall. Kneisley's colleague Debbie Peak gets a letter because she faxed a customer some printer information, then thought to call the next day to make sure it had arrived safely. Kneisley herself gets one from a woman who damaged four years' worth of data; working at home with a special data-recovery program, Kneisley salvaged it.
* Virtually everyone in the company, from Cook on down, spends a few hours each month working the customer service lines, underscoring by example the importance of what the department does. "I was hired in September," recalls Victor Gee, who started as a rep and is now a supervisor in tech support. "That same month Scott came by and started taking calls, too. I thought, What other company would have the president do the same thing I'm doing?" Every few months, moreover, each employee is taken to lunch by a top manager. Lunch with a Dork, employees have christened the program -- but its message is not lost. "My last one was with Scott," says customer support specialist Dwight Joseph. "He had his notebook with him, and he writes down what you say, any ideas you might have. It's pretty gratifying."
* A torrent of statistics -- daily write-ups, weekly summaries, hand-lettered charts covering a whole quarter -- tracks the tech-support department's performance for all to see. How many callers have to wait longer than 60 seconds? How many give up? At the company's Monday morning meetings, says Cook, "the first four numbers we go through have to do with customer service. Even before we get to revenues. It creates real peer pressure to improve service -- people see how we're doing each week."
At a lot of companies, pressure to improve customer service creates a white-collar sweatshop: harried managers browbeat supervisors; supervisors keep an iron grip on employees. Intuit, by contrast, is structured to encourage cooperation and to make improvements through innovation rather than through tighter controls. Greg Ceniceroz, recently promoted from tech-support rep to product specialist, is assigned the job of figuring out how to cut down on the average time spent with each customer. His first step toward a solution: a big loose-leaf reference binder containing answers to customers' most frequent questions, for every rep's desk. He encourages reps to submit questions and answers for inclusion in the binder and makes sure those who do get a public thank-you.
Kneisley, meanwhile, notices that management is looking for a volunteer to chair a group dubbed the Innovative Ideas Committee, which has been charged with collating and following up on every product-improvement idea emanating from the tech-support department and from Quicken users. She writes a four-page proposal about what she thinks the group ought to do, and gets the job. "We worked with her to set the committee's objectives," says Tom LeFevre, "since she had been here only a few months. But she was very interested. And the more interested someone is, the better job they'll do."
Involvement of that sort, of course, translates into a sense of ownership more valuable and more productive than any amount of iron-grip supervision. "Most of us work at least 50 hours a week," says Kneisley. "We don't get any extra compensation. But we do have a profit-sharing plan, and if Intuit does well, we will, too."* * *
Scott Cook is showing me Intuit's latest ad campaign. I'm a little incredulous, but there it is: Send for a copy of Quicken. Pay only an $8 shipping-and-handling charge. If you don't think you're doing useful work within a few minutes, don't pay for the product. No, not "send it back for a refund." Keep it. Just don't pay for it.
Why would a company do this?
"It's like the Japanese," Cook says.
"Oh," I answer, trying to think of the last time a Japanese company offered me something virtually free. Fortunately, Cook elaborates.
"It's like the Japanese assembly lines, where they have only two hours' worth of inventory. There's no margin for error -- they have to have superreliability from their suppliers." Cook goes to his bookshelf, pulling out a copy of The Machine That Changed the World, the new book about Toyota's "lean production" system. "What we're doing is the Toyota approach. We take away the safety net. If you do that, you have to get it right."
The more Cook talks, the more the scenes I have observed at Intuit begin to fall into place.
Tech support, for example. Here are 40 people answering all kinds of crazy questions -- for free. Here is a $500,000 state-of-the-art telephone system, installed in late 1989 just so callers won't have to wait so long. This isn't normal: nearly all of Intuit's competitors put a limit on tech support, some charging for it and some curtailing it so many months after purchase. And nearly every company with an after-sale call-in line doesn't mind keeping customers waiting for a few minutes.
But then, those companies have a safety net. "Most software companies would go broke if they didn't charge for tech support," argues Cook. "We said, We're not going to charge. If our customers have problems, we pay. That makes us get the product right the first time."
Take the product itself. For $50 or less -- sometimes as low as $20 on store-sponsored special sales -- you can buy a copy of Quicken. In its latest form, you get a program capable not only of writing checks but of tracking investments, generating profit-and-loss statements, and doing a dozen other chores a small-business owner or financially sophisticated consumer might want to do on a computer. You also get a 460-page manual, the right to regular upgrades at modest cost, and access to unlimited help. Once again: abnormal. Quicken's chief competitor lists for three and a half times as much as Quicken, and Quicken's price could probably double before Intuit noticed much of a sales decline.
But that would be a safety net. "We sell an inexpensive product, and we offer free customer support," says Alex Young. "We have to make sure it's right when it goes out the door." Suddenly, refinements like the Follow-Me-Home program make perfect sense.
And finally, look at Intuit's marketing. The no-pay ad, for example. "We heard from our focus groups that people really didn't believe the product could be so easy to use," recalls Mari Latterell. "After all, software never is. So we did this big advertising campaign -- 'You'll be using Quicken in six minutes or it's free.' The goal was to put our money where our mouth is." Even the company's tiny sales force -- two people -- begins to seem comprehensible. Outside salespeople could maybe push more product into stores. But depending on pull-through marketing means the company can't survive without satisfying its customers. "When someone comes in and thanks a clerk for selling him Quicken," says marketing vice-president John Monson, "there's nothing a salesperson could do that would come close to being as powerful a recommendation."
Funny that Monson should conjure up that image. When I return from my visit to Intuit, I call up the manager of the local Egghead Discount Software store and ask him about the product. "People love it," he says. "Someone actually came in here and thanked me for selling it to him. That doesn't happen too often."* * *
By some reckonings, Intuit's approach to customer satisfaction is costly.
Technical support and other departments that have customer contact (the one taking orders for checks, for example) cost the company about 10% of revenues, or upwards of $3 million a year. The testing, surveys, fancy telephone systems, focus groups, and other stay-close-to-the-customer expenses add another $1 million to $2 million. Imagine yourself a corporate raider concerned only with the next quarter's earnings: you'd buy up Intuit, cut back on all such expenditures, and boost profits anywhere from 50% to 100%.
"That," says Scott Cook, "is the advantage of owning the company. When you own the company, you take the long view."
In that long view, the payoff of the Intuit approach is far higher than the immediate cost. Quicken is likely to continue its utter domination of the market. Other products introduced by Intuit will be launched with a running start. Even now, fully one-third of Quicken customers say they bought the product because it was recommended by a friend. As they say in the trade, that's advertising money can't buy.
So is this: As I am working on this article, my friend Bruce stops by. "I hear you're writing about Intuit," he says. "I just bought its program, Quicken."
Bruce doesn't buy much software. A copy of Lotus 1-2-3 given to him by his sister-in-law sits on the shelf unopened. He uses his computer mostly for writing. But he bought Quicken because two different people urged him to. "You've got to get this program," they told him.
Now he has become an apostle himself. The reason: one day, while working on some financial records, he left the room. His two-and-a-half-year-old daughter, Emma, waltzed in and cheerfully turned off the computer. In a panic, Bruce turned it back on and booted up Quicken. "Don't worry!" the screen cheerfully informed him. Quicken had saved all but the last little bits of data.
Somewhere, at some point, Scott Cook's engineers had put that capability and its comforting message into the program. Intuit, they knew, was depending on its customers to sell the product.
And customers, they knew, don't really want money-back guarantees or complaint forms or even 800 numbers. What they want is the product to be right.
WAGER: ONE COMPANY
Scott Cook's year of living dangerously
MAY 1, 1985. Almost six years later, Scott Cook still remembers the date. "It was the worst day of my life," he says.
Who would disagree? His company, Intuit, was less than two years old. And he had to tell his seven employees he could no longer pay their salaries.
Cook knew he had a promising product, an easy-to-use check-writing program for personal computers. What he didn't have was money.
The dozens of venture capitalists he had approached scarcely gave him a second glance. The $350,000 he himself had sunk into Intuit, a sum pieced together from life savings and home-equity credit, from credit cards and loans from his father, was nearly gone. Without money, he had no distribution channels and no customers. What computer store would carry an unknown software product -- unsupported by advertising?
Intuit's sales so far had been a kind of good-news-bad-news joke. The good news: Cook had persuaded a few banks to sell the program in their lobbies. Each one ordered several hundred copies for inventory when it signed up, generating a little cash. The bad news: banks were lousy at selling software, so reorders were slim. Knowing he had to get the program into computer stores, he scrambled to sell to just a few more banks.
By the summer of 1986 Cook's efforts had just barely paid off. The little company had $125,000, enough to start an ad campaign. By rights he and his colleagues should have done some tests. But there was no time, not if they wanted to catch the Christmas selling season. So early in the fall they took the $125,000 -- all of it -- and spent it on one make-or-break ad campaign. Cook wrote the ad himself. If it didn't work . . . nah, better not to think too hard about that.
Well, Lady Luck was smiling that fall. Or maybe Cook's extraordinary efforts to create a product that would truly satisfy its buyers were on the money. Whatever the reason, the ad launched Intuit's program on what turned out to be a brilliant career.
"The company," says Cook, now president of a $33-million business, "grew a bunch."