At Federal Express, that means getting your package delivered on time. In the beginning, Federal Express was the only company that could accomplish that, but we realized that it wouldn't be long before UPS and others would duplicate the hub concept. The air hub was the only way a transport company could reliably deliver throughout the United States overnight.

It wasn't long before several companies established their own hub operations and began delivering reliably overnight. As UPS, Airborne, the USPS, and others began hub operations, Federal Express was still able to charge a 20% premium because it had moved up the scale to deliver on the intellectual needs, and the others hadn't.

The intellectual need of package shippers or receivers is to know where their packages are and when they will be delivered. This is an informational need that is nearly as strong as getting the package there on time.

Nearly every company must, in some way, ensure the physical needs are met before they can move up the scale to higher levels. Physical needs include making it easy and convenient to do business, getting a quality product, being comfortable in the buying or delivery process, and so forth. If product quality is poor, making it easier to return it is good, but it will cover up for poor quality for only so long before the customer tires and goes elsewhere.

This level of customer experience is the level that generally keeps people in the game and deserves great attention. Thoroughly working through the customers' physical needs provides ongoing customer retention even in the face of stiff competition and errors. An inventory of meeting physical needs is best identified by using the Hierarchy of Horrors exercise discussed in Chapter 13.

As I go through this evolutionary process, I'll use three disparate examples to show you that the principles apply to nearly every business. The three include Federal Express; Done Services, a drain cleaning service; and the Lund Dental Practice.

Done Services began business by meeting the needs of people with clogged drains. The physical need was to get the drain cleaned, but the company did not stop there, which I'll explain as I go up the value curve. The owner's vision was “one call and it's Done,” and the company lives up to the promise of peace of mind—an emotional need.

Paddi Lund, the dentist, meets physical needs by simply caring for your teeth with quality dental work.

However, meeting physical needs of customers is not enough. If Federal Express remained stuck at the physical plane, it would not be alive today.

UPS could, and did, duplicate getting the package delivered on time, and their system is more efficient for two reasons. First, it manages the pickup and delivery operations better, and, second, it has more density because it delivers more packages, thus lowering the cost per package.

On the physical side of customer needs, these two UPS advantages would seem daunting, but by moving up the value-added curve, Federal Express maintained leadership.

Therefore, Federal Express and others continually evolve their operations to higher and higher levels of customer value.

At Federal Express, that meant meeting the tracing needs of customers.

In the beginning of the company, we would fly customers in on the jump seat and run feedback sessions to discuss customer needs. We defined the six key ingredients to success in priority order. Get the package there on time was number one.

A close second that was somewhat surprising was “tell us where the package is—even if it's on time.” This was surprising because I had come from UPS where customers didn't care as long as the package got there.

The overnight business was entirely different as we soon learned. The overnight business is time-critical, and peace of mind was a very strong need. I'm delivering a presentation at noon and have some options if my presentation doesn't show, but I need to know with certainty that it will or will not show up.

We developed the bar-code tracing system to meet the informational needs. Later that evolved to PowerShip, a terminal to give customers the same information that call center agents had. Today, Federal Express uses Internet Ship, which even emails the recipient that the package is on its way and includes a tracing number for the recipient, giving both shipper and receiver total control. The system can even email that the package has been delivered, which is good for big companies that often have a problem finding the package after it has been delivered to the building.

These are examples of meeting the informational needs of customers.

Done Services also moved up the value-added curve by scheduling technicians into very narrow time slots. We've all experienced telephone hookup, furniture delivery, and other services where we have to be home to receive the service. Most companies tell you that they'll be there in the morning or afternoon. Done is able to tell you within 15 minutes when they'll be there. They often respond the same day, and they tell you that when you call. You have the information you need to know that the problem is handled.

Paddi Lund, the dentist, also moved up the value-added curve. Most dentists assume the customer doesn't need information. They embark on the work without informing the client what they are doing, or, at best, they inform you while your mouth is open and their hand is in it.

Paddi, on the other hand, has client lounges. After a preliminary examination, he takes you back to your private lounge, brings in tea and fruit, and calmly discusses what needs to be done to provide a healthy mouth. This puts people at ease and makes them far more willing to proceed with the work.

Meeting informational needs often naturally evolves to meeting emotional needs.

Knowing my package is going to be delivered on time gives me peace of mind, which is an emotional need. Knowing my drain will be cleaned and operational by this afternoon gives me peace.

Knowing exactly what needs to be done to promote my dental health and learning that in a peaceful, friendly surrounding gives me peace, and, because all medical work is very personal, makes me want to do business with the person who cares enough to sit down with me and inform me.

The first step in meeting any customer's need, whether physical, informational, or emotional, is to know who your customer is and what the specific needs are.

Interestingly, at Federal Express, it is not necessarily the people who benefit directly from the service, but rather their designates.

For example, an executive who needs something overnight asks his or her assistant to get it there, not really caring how, so the customer is the assistant, not the executive. In addition, the assistant's emotional needs are different than the executive's.

The executive wants the package there when needed and the peace of mind that it will be there. The assistant wants to keep the boss off my back, an entirely different emotional need.

The reader may recall Federal Express commercials where the boss comes storming into the office demanding to know why the package wasn't delivered on time, and an assistant, looking at a terminal, says that the package was, in fact, delivered this morning at 10:13 a.m. and signed for by John Jones. After this, the boss timidly backs out of the office, and the rest of the office people applaud.

Clearly, the commercial made the assistant the hero because she got the boss off her back, and Federal Express gave her the tools to do it.

For a while, most shipping people were treated with more dignity and respect by Federal Express than their own company gave them.

UPS is currently running similar commercials that take place in the shipping department with a young man challenging the old ways because UPS gives him the tools.

UPS also meets emotional needs by washing every truck every night whether it needs it or not. This rather expensive operation has been repeatedly challenged over the years during difficult times, but, as a core company value, has been maintained. The reason is simple, yet deceptive.

People don't see, for the most part, how their packages are handled, so they have no easy way to determine the quality of handling. Neatly uniformed drivers driving clean trucks and efficiently doing their jobs gives people the impression of quality because they can see it.

Done Services meets emotional needs with peace of mind prior to the call, but really drives it home during the service call.

The homeowner's emotional need is to have the peace of mind that, after my drain is cleaned, I won't have to spend the rest of my day cleaning up after the drain cleaning technician. Now, most companies would attempt to deal with this need by talking about it in brochures, advertising, yellow pages, and so forth.

Done Services wanted to convey a much more powerful experience. Drivers carry several uniform changes in their truck so they always show up in a clean, white uniform and driving a clean, white truck.

For a while, they even showed up at the customer's door with a red carpet and a vacuum cleaner rather than drain-cleaning equipment. The technician would go to the problem area and put the red carpet and vacuum cleaner down before getting the drain-cleaning equipment. This shows the homeowners in a very powerful way that their homes are sacred and will be treated with great respect.

When I see a cleanly uniformed technician and a clean truck, I am stuck with the idea that cleanliness is a value and again have the peace of mind.

The red carpet and vacuum statement was so strong that it also created story-telling and word-of-mouth sales.

The important point to be made here is that emotional needs are personal needs and must be delivered by employees who care. Showing up with a red carpet and a vacuum with a surly attitude that is incongruent with the clean theme not only doesn't meet the emotional needs of the customer, but creates an equally powerful opposite reaction because it is incongruent.

The emotional needs of the dental patient are met in literally hundreds of ways mostly invented by the seven people who work in the office with Paddi Lund the owner, not Paddi himself. In Chapter 13, you will see how these value-added services are created on a continuing basis at the Lund practice.

A few dental business examples…

When you arrive at the practice, you ring a doorbell and are greeted as if you were arriving at a good friend's home for dinner—always by name and often hugged. You are escorted to your own lounge where you are served tea and fruit and where you discuss any dental health issues.

The point is that your emotional needs are met in very personal ways by people who care.

One of the companies that does a great job in meeting its customers' emotional needs is Harley-Davidson. Harley discovered that the emotional need is lifestyle, freedom, and power. It has little or nothing to do with transportation.

The Harley Owners' Group (HOG) was formed to satisfy this need.

Delving more deeply, Harley discovered that noise and vibration gave people the sense of power they wanted emotionally. It is interesting that Japan has had difficulty competing with Harley in its category because Japanese manufacturers' sole purpose is to eliminate what the customer wants emotionally—noise and vibration.

By spiritual needs here, we don't necessarily mean religion although it may mean that to some readers. By spiritual, we mean a greater purpose where people (customers and employees) see that they are part of something greater than themselves.

The highest paid people who do the work in the U.S. culture today are athletes and entertainers. Although this may not sound like meeting spiritual needs, they do take people away from their egos and focus them on something outside themselves.

A winning sports team gives its fans the feeling of relating to something greater than themselves. A good movie gets people away from the humdrum of their lives and, again, makes them part of something greater than themselves.

In the beginning of Federal Express and most start-ups, there is a near-spiritual zeal for the company and its products. At Federal Express, a driver hocked his watch to pay for fuel to finish his deliveries. A pilot used his personal credit card to get the sheriff to let him take off. Six hundred people received a paycheck with a note not to cash it, and very few left. At this point, the company was out of money, but not out of spirit, and people did whatever they could to keep the company going, including forfeiting their own paychecks.

These are just some examples where employees demonstrated a spiritual zeal for their company and its success. Without this zeal, Federal Express would not be here today, because the zeal was picked up by customers who also wanted to be part of something bigger.

At UPS, many of their people are said to have “brown blood.”

Done Services grows and attracts employees and customers because it is a company that respects and cares about its people. Its people are paid on performance and make nearly twice the industry average, but, according to its employees, that is only an indication of an owner that cares about the people who help him achieve his goals.

It is values driven and gets ordinary people to rise above the ordinary and do what is necessary to deliver extraordinary service.

Probably the best example of a company meeting spiritual needs is the Lund Dental Practice. The practice does business by invitation only. Clients are able to recommend other clients to the practice, but they are reviewed by the staff and then asked to come into the office.

The entire focus of the staff and the dentist is on people, particularly the clients, but it extends into personal lives as well. It is clear that certain spiritual principles are at work. One such principle is that you receive what you give.

It took the better part of 10 years and an incredible focus on going up the value curve to build the business, but it is clearly a model of the future that will ultimately be duplicated in businesses around the world.

In summary, well-designed cultural structures enable a company to move up the value curve continually over time. The value curve is the evolutionary vision that most CustomerCultures have in one way or another.

This does not mean that, after a company has met the core physical needs, it no longer has to be concerned with physical needs. Quite the contrary, a company and its employees must continually reexamine how well they're meeting these needs with a never-ending vigil.

The key to moving up the value curve is to engage every employee in the process of growing as individuals and as an organization, and that requires cultural structures.

A great exercise for building a vision is to write a description of the experience you are attempting to create for your organization. You, as a leader, essentially put yourself into the mind of your customers, employees, and owners and relate the experience of the ideal. This exercise can be done for a company or even for a department in a larger organization.

Appendix A provides an example of such a descriptive experience.