costco logoIn the constantly evolving world of UK retail, one name that may not be as familiar as others is Costco. Perhaps the clue is found in their full corporate identity, Costco Wholesale Corporation. Their traditional customer base has been small and medium businesses (SMBs) and individual members from specific employment groups. Consequently they may not be as recognizable as the traditional “big four” UK supermarkets and other retailers, but that is likely to change, because they are also unrecognizable from the others for a very good reason. They actually care about their customers, are approachable and responsive and take immediate remedial action when a problem arises. More about that later.

I don’t think anybody would question that the retail world has been going through a seismic shift in buying habits for some time and, along with outdated ideas and business strategies, the resulting tsunami has washed away many of the companies that failed to react to the changing times (Comet, Blockbuster, Barratts, JJB Sports) . Clearly the emergence of on-line shopping has had perhaps the biggest impact.  But another trend, especially in the UK grocery world, appears to show that a quick flash of the discounter’s eyelashes via their low prices is enough lead us into temptation and away from our more traditional supermarket brands.

Despite that, loyalty still seems to have currency in the world of customer experience. At least if you are the recipient of as many webinars/seminar invites, articles and blogs as I am. And as a customer and a customer experience practitioner, I’d like to think that it still has aspirational, reputational and financial value. But as with any other desirable business trait, it must be continually and consistently earned, not just expected without some effort, which is where many companies are failing. In the UK, John Lewis and Waitrose still clearly understand that and continue to lead the way in both customer service and profitability. However, at the other end of the spectrum, we have also seen the inexorable rise in the fortunes of Aldi and Lidl. The biggest noise that you now hear in the market is the squeals from the “big four” supermarkets caught in the squeeze between these two solitudes, and trying to figure out if, and how, they can deliver low cost and decent, if not memorable, service.

But are these two objectives mutually exclusive? As a regular Aldi and Lidl shopper- I’ve even stopped hiding the shopping in M&S bags- it’s obvious that they haven’t really scrimped on service. OK, they may not have as many people roaming the stores and a more limited product selection, but their check-out people are generally friendly and personable, their managers available, helpful and responsible, and the shops generally well stocked – even at 6:00 pm (Tesco & Sainsbury’s please note). So there is hope.

Now let’s get back to Costco. As I also spend quite a bit of time in Canada, this is where I first encountered them. In Canada and the US, they not only support SMBs but also have a loyal (there’s that word again) following among individual consumers where Gold Star members can enjoy the same discounts as businesses and can shop both in store and on-line. Individual members are welcome in the UK and as this on-line service is now also available, I decided to sign up to take advantage of special on-line discounts and to get delivery of larger items. To cut to the chase, I encountered a few difficulties with the web-site and couldn’t complete the application process, effectively causing a check out failure and no little dissatisfaction.

Now some enlightened companies are using web analytics in real time to spot these problems and offer intervention and resolution via web-chat or other media. This not only solves the problem for the customer but can save the company time and money as well as keeping reputational damage to a minimum. Unfortunately this wasn’t in place and my only option was to call Costco customer service. To their credit, Costco offer a toll free 0800 number, unlike many UK based organizations that continue to rip off customers with expensive 084X and 087x numbers for customer service from which they benefit financially. However, this still meant a cost to me in time, and that’s still an investment where you can’t get any refunds.

As a result I decided to send an email to a senior person at Costco UK detailing my problem.  I’ve found this is mutually beneficial as a way to get resolution and to alert someone in the company that might actually care and address the issue promptly it. It took all of 5 minutes to get a telephone response from Costco. In another 5 minutes, my problem was solved, my on-line account set-up and all done with good humour, and a welcome blend of professionalism, candour and knowledge. There was also a sincere statement (I can tell the difference) of appreciation for raising the issue and a commitment to fixing the problem over the longer term.

So what can we learn from this?

  1. If you are driving more customers to your web-site, and/or expecting them to self-serve, you must monitor, measure and manage what’s going on in real time across all of your channels, but especially web transactions. This has cultural, operational and technology elements and all must have a seat at the transformation table as they are inextricably linked and interdependent. As noted, very few companies appear to do this, resulting in disgruntled customers who are forced to go elsewhere, or who must engage in a customer service call to explain the problem, which can be costly to both parties, and hope that the person responding can actually do something about it.
  1. But just knowing about it isn’t enough. You must have the right people, with the right attitude and who are equipped with the knowledge, the authority and the ability to provide intervention, resolution and if necessary, compensation. This is why you must never outsource customer service, as dealing with uninterested, unempowered, disengaged representatives whose typical response is a lame “I’ll make sure I pass it on to the relevant department”, simply doesn’t cut it (BA, BT and O2 please take note).
  1. You must then let your customer know that you appreciate that they took the time to raise the issue and the steps that you are taking to eliminate the issue in the future – tomorrow will be fine. Many people still don’t bother to complain as they believe that nobody will respond or do anything to fix the problem. And quite often they’re right. This is often where customer satisfaction surveys also fall down. How many times have you been contacted by the company doing the survey thanking you and letting you know that as a result of your comments, changes have been made? That’s what I thought!
  1. But don’t just depend on technology to get you out of a tight spot. Encourage, incentivize and reward employees for recognizing and acting autonomously and spontaneously when customers are having problems. Most of us naturally want to help others and come pre-wired with an attitude and a caring side that is ideally suited to achieving that objective. But often organizations want to actively discourage any personal feelings or emotions from creeping into their employees’ actions with the result that customer issues are ignored and/or swept under the rug entitled “not my job”.

The best companies support purposeful behaviour and enhance their customer engagement by encouraging employees to build on these natural feelings and attitudes and to let them loose on their customers and fellow employees. The benefits of this were amplified in a recent article by Steven Van Belleghem entitled Defining the ‘human touch’ in the customer relationship. He notes that “Creativity and innovation are uniquely human characteristics. It is smart for companies to allow human creativity to blossom in all phases of the customer relationship. You must allow all your staff to think creatively about improvements that can benefit the customer.”

Costco clearly understands the value of this approach and, similar to Zappos, have a public mission statement that states their core values and that actively encourages their employees to do the right thing – for the customer. As with any complaint handled well, they come out the better for it. Yes, price is important, but low cost and great service aren’t necessarily strange bedfellows as Costco have shown me by their actions in this matter and through my regular store visits. And it’s not just luck. Costco is a responsible and caring employer that has historically paid above average wages, provided generous employee benefits and is consistently ranked among the best places to work in the United States. As a result they have built a “can do” culture and enjoy a high degree of employee engagement, which in turn is reflected in the way they interact with customers.

At Costco, it’s not just the price that’s right.


In the interests of disclosure, I should add a small disclaimer to this tome. I am a Costco shareholder, so I obviously want them to do well. But as a reasonably altruistic investor, I want, and expect, them to do well for the right reasons.  And they are!