For 26 years, Larry Judson and his team at K-Designers have focused on satisfying customers, the results are clear
Four or five times every month, the staff at K-Designers’ gleaming new 52,000-sq.-ft. headquarters in Gold River, Calif. uncover an error in completed and sold contracts just arriving in from the field. After checking the pricing agreed to at origination and comparing it to the actual amount of labor and materials required to complete the job, the paperwork shows that a customer got shortchanged on the firm’s rigidly enforced 10 percent discount. The error might mean that a customer’s discount was only 9 or 8 percent. And so, four or five times every month, K-Designers recalculates its discount on those contracts and adds back another 1 or 2 percent. The company then sends checks for anywhere from $100 to $1,000 to its customers to make up the difference. Conversely, if a customer happened to benefit from a greater discount, they keep their gain.
This might sound like a recipe for going out of business, but when you hear the practice explained by K-Designers’ founder Larry Judson, it begins to make more sense. It demonstrates a commitment to customer satisfaction that is often rewarded with referrals and repeat business down the road. The company does not like to write extra checks. So the firm discourages these inaccuracies by splitting the payback with the sale representative who made the sale. K-Designers takes a little less profit and the sales rep loses some commission. In the end it is a fair deal for everyone, says Judson.
In the 26 years since Judson launched the replacement contracting firm with his brother Lee, a guiding tenet of company culture has been providing complete customer satisfaction. It also has meant a stream of new methods for pleasing clients added layer upon layer into the company’s systems and practices. This rigidly accurate discount practice, for example, is only one of those ideas the company utilizes every day.
K-Designers operates with a 100 percent satisfaction guarantee on all completed work before the customer is obliged to pay any money. Since 1981, says Judson, the firm has not collected a single down payment. Nor has it offered a draw schedule of any kind. Instead, payment is made only after the customer signs off that everything has met his or her expectations. And only rarely does a customer say they are not satisfied. In those cases, the customer is typically offered an extra product offering free-of-charge to make them satisfied. In fact, K-Designers has an enviable track record of signing up its customers using in-house financing. Last year, fully 71 percent of its jobs were financed through K-Designers.
But the heart of the company’s customer satisfaction program is a methodical scheduling program that sets job completion expectations that are uniformly met by the K-Designers’ crews in the field. The firm has learned over the years that delivering a project on time is the single most critically important factor in satisfying its customers. Each customer is told when the crew will arrive to begin a job and is also given an ECD, an expected completion date. Hitting those dates is religion at K-Designers, says Judson.
So far K-Designers’ attention to customer satisfaction has paid off. In 2003, K-Designers generated over $55 million in revenues to capture the fourth spot on Qualified Remodeler’s annual Top 500 listing of the industry’s largest firms. Judson notes that five years ago, when the 10 percent discount program was first instituted, revenues amounted to $35 million, “so we feel confident that our attention to customer satisfaction has had a positive impact on our business,” he says.
But customer satisfaction is only meaningful in the context of these tangible results. Until 1996, the company knew it was doing a good job at satisfying its customers but could not move beyond anecdotal evidence of its success. Since that time the firm has implemented a disciplined procedure of customer interactions that culminate in a 33-question survey about how their job went. The results of these surveys are tabulated according to branch and aggregated into monthly and year-to-date reports. Staffers at branches that score highest win nights out on the town. Managers of branches that score highest each month receive bonus money that can be kept or split with top performing individuals.
The science of satisfaction
One of the most common misperceptions about customer satisfaction begins with the generic nature of the term itself. Many remodelers justifiably say they work hard to satisfy their customers, and in a generic sense, they do or it would eventually become difficult to stay in business.
But customer satisfaction in the sense that K-Designers and many other top businesses use the term describes a process that is measured and monitored. In many cases it is a key driver in a larger process of continual improvement at the business. And at some of the nation’s most respected companies, a strong program of customer satisfaction is an integral part of a disciplined Quality Assurance or Total Quality Management program that guides their business. (To read more about Total Quality Management, refer to the Profit Builder feature on the Kleinco Company Profile on page xx in this issue.)
Judson describes K-Designers’ commitment to customer satisfaction as a philosophy that has been with the firm from the beginning. But the company really began tracking its success in this regard in 1996, when the firm briefly contracted to work within the Sears network of home improvement contractors. It was Sears that first sent out detailed questionnaires to K-Designers clients just after each job was completed. The results confirmed that Judson and his team were doing an exceptional job at satisfying customers, a confirmation which had eluded the firm in that point. Later after K-Designers left Sears, Judson and his team drew up a new 33-question survey that now goes to each of its clients at the end of each job.
In 2003, the firm completed 6,199 jobs, and each of those customers received a survey within a week of completing the job. By offering a leather-bound organizer as a gift, 47 percent of those clients returned their surveys last year. The specific wording of those questions has been refined over the years, says Judson, in an effort to elicit the most objective set of responses. Therefore, the company considers the questionnaire a proprietary business tool. What can be said is that the survey is organized into groups in order to drill down on how each customer felt about every stage of the home improvement experience with K-Designers.
The questionnaire format asks clients to rank from 1 to 10 their level of satisfaction with various aspects of their contact with the company and its crew members. There are seven questions about their first contact with K-Designers. There are 12 questions about the home presentation and demonstration. There are 11 questions about the installation process. And finally there are three questions about overall satisfaction that are asked in a “yes or no” response format. Within in K-Designers’ and at other companies where formal customer satisfaction processes are in place, the key statistic is willingness to refer. At this point, more than 96 percent of K-Designers clients indicate that they would be willing to refer the company to family and friends. Importantly, the survey also allows them ample space to write in those names and telephone numbers. Three percent of the company’s new business comes from these referrals. Eight percent of the company’s new business comes from previous clients.
The K-Designers process
The desire to satisfy customers has had a marked impact on operations at K-Designers. The company employs crew leaders who lead teams of subcontractors in the field. Before an employee can be made to a crew leader, he must first go through a certification process that ensures the individual knows each step of a carefully orchestrated customer interaction system and process.
To ensure that each customer is getting the exact same level of service, there are two sets of checks on the teams in the field. On the administrative side a call is placed to the customer one or two days after the job was set to begin. They ask if the job started when they said it would and they ask if there are any questions or concerns. After that, the administrator from the branch asks to speak with the crew chief and asks if they have all the supplies they need to finish the job on the expected completion date. The second check comes from a company inspector assigned to each of the company’s eight branches. They visit each job and ensure the work is being done correctly.
“We inspect each job and get a report on it,” says Judson. “Even the most expert installers who have been with us the longest know that their work will be inspected. They are going to be inspected on everything they do. So it is a system. It is part of K-Designers. We inspect what we expect.”
Each crew does only one job at a time. At the end of each job, they are required to bring in a completion form signed by the customer, saying that the job was completed to the customer’s satisfaction. They also report back with hours spent each day on the job and other details. This closes the loop on the promise made in the salesperson’s own handwriting at the top of each contract at the time of sale: “customer to be 100 percent satisfied before any payment is made”.
“We don’t make that offer in small print,” says Judson. “They have to write it on the top of each contract. This is a big deal to us. We emphasize this when we fly everyone into Sacramento for training with us.
“This is another help in satisfying the customer. We are showing them we are willing to take the risk, and they take no risk in doing business with us. If the job is not right when we finish, it will be made right before they pay us.”