…the intuition there wasn’t simply ‘How do we best help people fix their computers?’ It was ‘How do we restore and enhance customer relationships?’ – Ron Johnson, on Apple’s Genius Bar, “Retail Isn’t Broken, Stores Are,” Harvard Business Review December 2011

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There is much debate about the role of the branch in the midst of the multi-channel explosion where transactions can be conducted by a multitude of increasingly mobile electronic devices such as cell phones and tablets. Of particular challenge is how to integrate and optimize the various channels as branch traffic continues to decline and daily product sales per employee, according to Novantas, have dropped from 1.70 in 2003 to 1.12 in 2010.  To this complex question let me propose one very simple, blindingly obvious tenant:  The branch is the channel for building relationships.  While it is a place where transactions, sales and customer service are delivered, its unique and most valuable function is to form, grow and mature relationships.  Longer-term customer retention, expansion, and attraction of new customers along with the building of the brand and future revenues are most influenced by this one single mission.  If we could take that tenant to heart, it would clarify a bunch of issues around strategy, skills, tactics, metrics, incentives and results.

Some background.  We have all lived through various chapters in the life of the branch.  At one time or another we decided to make the branch the place to: improve quality and get rid of defects; enhance customer service by solving problems and being very friendly; increase sales including crossing-selling additional products; and lower cost through greater efficiency and reduced staff.

Yet many of these initiatives have ignored or even been detrimental to relationship building.  Examples abound:  rigid, centrally-driven quality control procedures that are off-putting to customers; siloed customer service efforts that require dealing with a separate and often distant stranger; aggressive cross-sell efforts that ignore customer needs and often repel relationship building; and, cost reduction efforts that make skilled and available staff scarce.

The Apple Store provides a compelling example of the focus on relationship building in a world driven by young, tech-savvy buyers – they are not drivers of your father’s Oldsmobile.  Apple now has 357 stores with over 77 million store visits this past quarter.  Their average annual per store revenue of $40 million is off the charts.  Who says the store is dead?  How have they done this in an industry where manufacturers like Dell, just a few years ago, came to dominate with online sales?

Well, it is important to acknowledge that Apple has been a leader in the development of really cool, innovative products that appealed to the masses.  That alone made them wildly popular and highly successful.  But they did not stop there.  They advanced from the coolest, best designed products to the coolest, best designed relationships and they focused on the store and store staff to do that.  In a December 2011 Harvard Business Review interview, Ron Johnson, the architect of the Apple Store and recently named the new CEO of J.C. Penney, addressed the thinking behind their design of the physical channel – the store and its staff.  Three strategic relationship priorities stand out:

First, help the customer find the product that is right for them – in a way that will build the right relationship.  Apple has chosen a non-commissioned sales force in order to avoid sales incentives that put the interests of the salesperson in competition with the needs of customers.  Their focus is not on selling but on finding the right product for the customer even if it’s not an Apple product.  This reinforces that the staff person and the place are a sacred source of value and that the relational trust is not undermined by misaligned financial incentives.  This issue of authentic relationship is particularly relevant today given the rapid rise in institutional and corporate distrust exacerbated by the recent financial meltdown and associated recession.

Second, in fixing broken products, also focus on fixing the relationship.  When there is a problem with a product that does not work as promised it is important to understand that trust and thus the relationship is damaged.  The idea behind having the “Genius Bar” on site in each store to fix products was that relationships can only be built and re-built face-to-face with a human being.  Johnson states that Apple is in the relationship business just as much as the computer business.  It is one thing to say that and it is quite another to design relationship building stores and interactions as assiduously as you design iPads and iPhones.

Third, building the right relationships with staff is just as important as selecting the right staff.  Across the 357 store system, Johnson met with and helped select every store manager.  Why?  Because he is God’s gift to talent evaluation?  No.  He states:  “Because I wanted to build relationships with all of them.”    That way they know what he wants and values and he knows them and has a connection.  He concludes:  “Every employee at an Apple Store knows someone well that knows me…Everyone has a passion or mission in life that if matched with the right job will allow them to flourish.”  He was looking to find and build relationships around a common vision and passion.

In reality, we have built branches and staff with a purpose to transact, sell, service and even to minimize our cost.   None of that will go away.  But what if, as a part of our multichannel strategy, we simply vowed, “The highest and best calling for the people and place of the branch is to profitably develop and grow relationships, and that is what we will charge them with and support them in doing?”  If we could lock that mission down, many of the other decisions would be easier and more effectively executed.  It is disarmingly simple:  Design, construct, staff, evaluate and reward the branch for building customer relationships.

(Column appeared originally in ABA Bank Marketing magazine – March 2012)

By ROBERT E. HALL

Not to be reproduced without written permission. All rights reserved. © Copyright Robert E. Hall 2012