The feedback from that questionnaire, he believes, saved the company. Customers didn't have a problem with Crutchfield's pricing. The product selection was more than adequate. They simply were intimidated with the prospect of installing their own car-stereo systems.
With that in mind, Crutchfield got to work producing a more polished and user-friendly catalog that included an easy-to-follow article on car-stereo installation techniques, helpful photographs, and, for a dash of marketing, a few customer testimonials from the survey. Something clicked. In the first quarter of 1975, monthly sales were under $4,000. After the mailing of the revised catalog in April, sales leaped to $13,763. The following month, sales rose to $22,000.
That survey, Crutchfield says, taught him the importance of listening and responding to customers. It was that simple, and it worked. From 1975 to 1982, the company's sales continued to rise. As the auto industry started to produce cars that came equipped with high-quality stereo systems, Crutchfield diversified his product line to include home audio products, telephones, and other personal electronics.
Yet as the company grew, Crutchfield soon found himself overwhelmed. He had difficulty transmitting the company's service culture to his middle managers, and without the help of effective managers, he was unable to keep close tabs on his 50 employees. Customer service representatives were losing their focus and zeal. Salespeople were looking to pad their commissions by selling customers high-end equipment they didn't want or need. The warehouse was so bureaucratic that same-day shipping had simply evaporated.
Sales had continued to grow each year through 1982, but the rate of growth was slowing. Then, in 1983, sales fell 10 percent, and the company's earnings turned negative. All this while Crutchfield was paying to construct a new building. "We didn't have the resources to last more than another year or so," he says.
When the University of Virginia's McIntire School of Commerce examined Crutchfield's situation for a 1984 case study, the faculty case writer concluded that "increases in sales just seem to lead to greater increases in inefficiency in operations. Crutchfield Corporation has gotten bigger than Bill Crutchfield can handle. This loss in operating income is a very obvious signal that things are going wrong."
Crutchfield had already come to a similar conclusion. "It's like when you start gaining weight: it just creeps up on you very gradually," he says. "I woke up one day and realized that this was not how I built this company. A lot of dysfunctional behaviors had crept into the company from the time I started adding layers of management."
Crutchfield dug in and started looking at every aspect of the business. He listened in on customer service calls, read letters from disappointed customers, and broke down the compensation plan for the sales team. To return the company to its roots, Crutchfield wrote down a set of core beliefs that harked back to the days when the company was still young: namely, exceeding customers' expectations, maintaining a passion for continuous improvement, and treating co-workers with dignity and respect.
Crutchfield met with each employee to explain the importance of the core values and the consequences of not adhering to them. Staff members were given a chance to adjust and improve, but those who didn't buy in were soon let go. "From that moment on, it really made things very easy," Crutchfield says. "We don't need a 500-page manual on how to behave. Just treat people the way you want to be treated."
Adherence to those core beliefs helps explain why character, not technical know-how, is the most important thing managers look for when interviewing new employees. "The fundamental question I ask prospective hires is, 'Do you like helping people?' " says Phil Jones. "It sounds stupid, but some people don't. You can train them on the tech stuff, but you can't train somebody to enjoy helping other people. That's either there or it isn't." Those who do like helping people tend to stick around. "I've been here 18 years, and there's a guy in my department who still calls me 'the new guy,' " says Jones. "He's been here for 30 years."
The company's ties with its vendors are also solid. "Crutchfield is fair, but they're also demanding," says Bob Weissburg, president of sales and marketing for D&M Holdings, owner of consumer electronics brands such as Denon and Boston Acoustics. "They require a lot from their vendors by making sure that we can always back up any claims we make."
Good relations with vendors paid off in the 1990s, when catalog companies were struggling to make sense of the then-new phenomenon of e-commerce. Crutchfield got a leg up launching its Web business, when, for instance, it was the only retailer authorized by Sony in 1996 to sell its products online, a monopoly the company held for close to three years.
Internet orders now account for about 70 percent of the business, but Crutchfield is still very much in the catalog business; it mails out more than 30 million per year. "Contrary to what some Internet consultants will say, the catalogs will continue to be around," says Crutchfield. Add to that the toll-free hotlines whose numbers are plastered all over the company's website, throughout the catalogs, and on the boxes the company ships to customers. "It's a three-legged stool," Crutchfield says. "All three of those components are just our way of making it easy for our customers to communicate with us."
Of course, no company is perfect. If you want to find a TV with a lower price than Crutchfield's, you probably won't have much difficulty. As one commentator on BizRate complained, "Prices are a little on the high side for middle-income folks." That's something Bill Crutchfield won't deny.
"We're never going to be a Walmart or an Amazon, and you can go on the Internet and find hundreds of retailers who are selling this type of product for less than we do," he says. "But you're not going to be able to find a retailer who provides the level of service we provide. People have the assurance that if they call us, there will be a highly trained, nice person on the other end of the phone who can truly help them if they need it. To some people, that's very important."
It also costs a lot of money to provide. "We run an expensive operation, and it is a big investment," he says. "Our overhead is probably significantly higher than most of our competitors'. If I were to sell the business to a company that was looking for short-term profits, there is a lot of low-hanging fruit here. A lot of money could be made by cutting out all these services and then riding the coattails of our great franchise. But in the long run, they would ruin the company, and in five years, there would be nothing left."
If that sounds familiar, it is because that is pretty much the path Circuit City followed on its way to oblivion. In 2007, the struggling electronics giant announced the layoffs of 3,400 of its most experienced and best-paid salespeople. They were replaced with lower-paid but far less knowledgeable workers. Crutchfield says he will never let that happen as long as he is in charge. "Ours is a business where you need to be able to relate to people," he says. "Crutchfield is a business you need to run with soul."
