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Two Companies Who Perform Well in Good or Bad Markets

The hotel industry is struggling today. Demand is off everywhere in the world. Everyone is suffering, including Marriott. But Marriott will survive, and even thrive, in this market. It has been through bad times before and always has emerged the leader in the industry. (See Audio Tip #31: Volatility in Hostile and Non-Hostile Industries on StrategyStreet.com.) It leads its industry because the top management of the company focuses all its energies on delivering a consistent, predictable product in each of its dozen or more brand names. It is known throughout the business travelers’ world as the most consistent and reliable of brands. A traveler knows exactly what to expect when staying at a Marriott branded hotel and virtually always gets what he expects.

Another company, who happens to be doing well today, with the same ability to thrive no matter what the market is McDonald’s. In its quick service restaurant industry, McDonald’s has the same kind of reputation that Marriott enjoys in the hotel industry. It is the most consistent and reliable of brands. Here again, the top management of McDonald’s pays close attention to the experience a customer has in any of its stores world-wide.

I have had the distinct pleasure of working closely with both of these companies during earlier difficult times. I have come to understand the reasons for their success and will outline just a couple of the more important reasons here. In Marriott’s case, the first reason is CEO Bill Marriott and the approach he brings to the management of the many hotels the company has. Marriott visits rooms, samples food, checks for cleanliness, visits competitors and then issues specific instructions on how to improve. The other senior managers, and their direct reports, emulate the boss with the same attention to detail. This attention produces consistency. The second reason for Marriott’s success is its core value. It is expressed roughly as follows: “If Marriott employees are well taken care of, they will take care of the customer, then the customer will come back.” The company treats employees well, trains them carefully and pays them competitively. These employees proudly deliver superb service to customers, who will return to Marriott in good and bad times.

Though in a different industry, McDonald’s is much the same. Everyone knows the story of Ray Kroc’s establishment of McDonald’s. He is certainly a seminal figure. He was followed as CEO by an equally legendary manager in the McDonald’s world named Fred Turner. Together, these fine leaders created the motto for McDonald’s, calling it QSV&C. These initials stand for Quality, Service, Value and Cleanliness. McDonald’s delivers on all four of these promises more consistently than any of its competitors. A customer knows exactly what he will get at every visit to a McDonald’s in any location in the world. And the customer is far more likely to get that same consistent quality, service, value and cleanliness with McDonald’s than with any other quick service restaurant company. While working at McDonald’s I interviewed every senior McDonald’s executive. In each of those conversations, a reference to QSV&C was an important part of our discussion. Those letters, and what they mean, are seared into the brains of every McDonald’s manager, all to the good of the customer. This focus produces consistency.

Both of these companies rely on franchisees for the overwhelming number of customer experiences. Each control their franchisees and the quality of service they deliver by being the most attractive company in the industry. Marriott and McDonalds’ franchisees make more money than their compatriots in competitive brands. Sometimes these franchisees may complain about the prices they pay to be a franchisee of Marriott or McDonald’s, but they know where their bread is buttered. These companies deliver more reliability for their customers. Their franchisees, who are a major source of their quality delivery, get paid well for that better service.

Both of these companies lead their industries on Reliability in the Customer Buying Hierarchy (see Audio Tip #95: The Customer Buying Hierarchy on StrategyStreet.com). You can say the same thing about most strong industry leaders. (See Audio Tip #24: The Customer Buying Hierarchy as Markets Evolve on StrategyStreet.com.)

Posted 7/16/09

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