Success Stories

THE PROBLEM: Customer Satisfaction Scores Were Flatlining

In 1996, customer satisfaction scores were flatlining. In a satisfaction study of insurance adjusters (a prime source of customer referrals), some adjusters had ranked Enterprise below one of its competitors. CEO Andy Taylor knew it was up to him to change things. He vowed to ensure that Enterprise set new standards of excellence in service and customer relationships. The only question was how to go about it.

The company had been experimenting with customer-satisfaction surveys ever since 1989, when it first began marketing car rentals to consumers. But back then, many managers doubted that the surveys really meant much. Any difficulties, some of the managers said, weren't systemic; they could be addressed locally. That was more in keeping with Enterprise's decentralized tradition.

But by the early 1990's Andy Taylor was worried, partly because he himself had been hearing more complaints than usual from customers. So he assigned a team of senior managers to work on the surveys. That team designed a new instrument - and like a lot of such instruments, it suffered from "question creep". At the top, however, was the question that would turn out to be central to the whole endeavor: "Overall, how satisfied were you with your recent car rental from Enterprise?" The five boxes a customer could check ran from "completely satisfied" to "completely dissatisfied." Taylor and his team decided that the company would calculate the percentages in each category for this question. They would call the scores the "Enterprise Service Quality index," or ESQi.

Thus did Enterprise launch the measurement process, as Taylor later told Fortune, that "enabled us to go from being a nearly $2 billion business in 1994 to a $7 billion-plus business" in 2004. But in 1994, there was still a long ways to go. Making ESQi into a useful, credible tool turned out to be a long, involved, and contentious process.

THE SOLUTION: Refinement of Survey, Taking Action to Improve Scores

Enterprise's first questionnaires went out in July of 1994, and the company reported its first three months' worth of results to senior managers in October. Overall, the ratings were only fair. But only 67% checked the "top box", as the company called it, to indicate they were completely satisfied. That score, Taylor felt, was far lower than it should be.

The first reaction among some managers was to shoot the messenger. Low-scorers, Taylor remembers, "ripped the measurement, the survey questionnaire, and the sampling technique behind it." Managers asserted that ESQi might be a valid measurement of satisfaction, but did it have anything to do with growing the company? Was there really a connection between customer satisfaction and financial results?

So Taylor and his team continued to examine and refine their methods. They found that branch size and geographical region didn't matter - top performers and poorer ones could be found in any category. They challenged the notion that senior managers already knew where the problems lay; asked to rank their various operations above or below the company's service average without looking at the latest ESQi scores, the managers couldn't peg more than half, the same as guessing.

Taking the Measurements Seriously in Order to Improve Them

All these findings quieted the skeptical executives. The measurements meant something. But nothing actually seemed to be improving the company's scores. So Taylor's next challenge was to get his executives and his branches to do something about the measurements. It was, he wrote, "a time for leadership, time to put some teeth into our efforts."

Step 1: Taylor's first step was to link ESQi scores to corporate recognition. At Enterprise, the granddaddy of recognition programs is the prestigious President's Award, a coveted prize given to people who make truly exceptional contributions to the company. After 1996, you weren't eligible unless your branch or region was at or above the corporate average for ESQi.

Step 2: The company redesigned its monthly operating reports to highlight ESQi, listing every branch's score right alongside the net profit numbers. The reports ranked every branch, region, and group manager in the company, so everyone immediately knew how he or she stacked up against everyone else. Moreover, the company announced that no one with a below-average ESQi score was eligible for promotion.

Step 3: "ESQi became a topic of every speech I gave internally," says Taylor. "Customer satisfaction went on the agenda of every management and operations review meeting at all levels. When I was present, I would go right to the bottom of the ESQi rankings and pointedly ask the managers responsible to explain what was going on and what they were doing about it. Those were apt to be the first questions in a sustained grilling."

THE BENEFITS: Scores Improved, Faster Growth

Before long, ESQi was an inextricable part of Enterprise's corporate culture. And gradually, ESQi scores began to improve. In 1994 the average had been around 67. By 1998 it had risen to 72, and by 2002 it hit 77. The gap between top performers and those at the bottom narrowed, shrinking from 28 points in 1994 to only 12 in 2001. Even the laggard brought its number up to above average, and again was winning some President's Awards.

Enterprise has been highly successful in reducing detractors: the proportion of customers who rate their experience neutral or worse has declined from 12% to 5% since 1994. This drop by itself has improved the firm's economics - there is less negative word of mouth. The increase in the percentage of promoters also improves the economics, both by driving growth and reducing costs. For instance, Enterprise can afford to advertise at a lower rate per day than Hertz and still grow faster due to its word-of-mouth advantage. Measuring and managing the number of customer promoters created at each branch allows the company to turn word-of-mouth from a soft benefit into a quantifiable competitive weapon.

In the United Kingdom, Enterprise continues its upward trajectory. Enterprise has grown an average of 20% per year while the competition has been shrinking, and thus has consistently gained market share. Many companies have been unable to repeat their success in one country when they set up shop in another. Enterprise seems to have found the secret.

Source: Abridged copy from The Ultimate Question by Fred Reichheld. For the full story, please refer to the book.