Type the saying 'the customer is always right' into Wikipedia and the explanation of the phrase makes mention of two famous businesses people — Harry Selfridge and Cesar Ritz — who lived and breathed the phrase.
Giving customers what they want is vitally important for the long-term success of many companies, particularly when switching costs are low and competitors plentiful. This is no more obvious than in the food service industry where consumers are generally spoilt for choice – receive bad service at one restaurant and you need never return, but receive wonderful service and you will likely return again and again.
Although the switching costs for customers are higher at pooling solutions firm Brambles (ASX: BXB) than at your local restaurant, Brambles makes a point of focusing on delivering customer service with the stated value of "All things begin with the customer." In its latest annual report, the firm states that it is striving to make Brambles the most customer-centric organisation in our industry. Shareholders in Brambles should welcome this stated aim as remaining relevant to customers and building strong relationships is critical.
Brambles' customer focus is also shared by hearing-implant developer Cochlear (ASX: COH). One of Cochlear's three guiding principles is a "Lifetime commitment to lifelong service." One of the reasons Cochlear enjoys such a commanding market share is not just that it produces such a high quality product, but also that it backs that product up with customer service. For customers deciding between competing products, service is a critically important part of the equation, especially when you are dealing with something as critical as hearing.
CSL (ASX: CSL) is a third company that puts the customer at the centre of what it does. Under the company's published "Values and Ethics", its first point states, "we are passionate about meeting the needs of our customers." Given the lifesaving properties of many of CSL's therapies, some investors might think that a focus on the customer would be a given, however other drug companies have shown in the past that the customer is not always the focus and ultimately shareholders have lost out in this type of strategy.
Foolish takeaway
A review of the long-term returns from an investment in Brambles, Cochlear and CSL show that all three firms have significantly outperformed the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO) over a 10-year period. While there are many reasons for this outperformance, a strong focus on providing customers with a high level of service is no doubt one of them. For investors, identifying firms that provide above average utility and commitment to customers can be one way to potentially identify a firm likely to outperform the wider market.
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More reading
- Smaller banks ahead of big four in customer satisfaction
- Why Woolworths, Stockland and Toll Holdings will set new highs
Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.
