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University of Massachusetts Amherst

Family Business Center

Yes, It's Written In Stone: The Customer Is Right

by Shel Horowitz

At Stew Leonard's, it really IS written on a rock: "Rule 1: The customer is always right. Rule 2: If the customer is ever wrong, reread rule 1." And the three-ton rock has a prominent place at each store entrance.

Priding itself both on low prices and extreme service, Stew Leonard's is not the typical small grocery chain. Stew Leonard, Jr. told the Center about it at the May gathering.

A 100% commitment to the customer can lead to some interesting situations - like the time a security employee asked a woman not to stuff her pockets full of strawberries, and she told him to go read the rock!

Another customer presented a coupon for a free half-gallon of ice cream with any three-dollar purchase. The cashier accepted the coupon, but then went around afterward to the other staff, asking if anyone had ever seen it before. A veteran employee said it was something Stew, Sr. had done when the store was very new, to get the average sale up from two dollars.

The next time that customer came through, the cashier asked, "'did you know that coupon was over 20 years old?' "The woman said, 'I was cleaning out my mom's attic and found it in an old newspaper. I'm a reporter for the local paper and I just wanted to test the rock.' She wrote her story, and then it was picked up by the Wall Street Journal." Better yet, the store attracted the attention of management guru Tom Peters. After Peters wrote about the store in two of his books, the store became a destination for visiting Japanese businesspeople - the only people who would buy the 5000 miniature engraved rocks that Leonard had ordered.

And how does that rock happen to be at the store entrance? It was Stew Leonard, Sr.'s daily reminder to himself, after losing a customer over a badly handled return. And Stew, Jr. firmly believes in the message on the rock. "Sometimes employees want to 'protect' us from the customers and not give money back. They have to realize each customer represents $60,000" in lifetime value. "We don't want to lose that. We've had customers bring back a fresh-cut Christmas tree in February and say, my tree died. We give them back their money. We get abused a little but we make the customer happy."

Leonard is the third generation family CEO. His grandfather started with a traditional dairy, delivering to homes with a fleet of small trucks, But as soon as Stew, Sr. got involved, things started to change. "He decided to jazz it up a little. He put cow heads on the front of all the trucks. And the horns went moo."

When the state took the Leonard farm for a highway overpass, Stew, Sr. did some research - and he found that dairy delivery was a dying industry. But he talked to one extremely successful farmer on Long Island who had opened his bottling plant to public view. So in 1969, Leonard opened the first Stew Leonard's in Norwalk, Connecticut, selling all of eight items in 17,000 square feet of space. And the public could watch the milk being bottled.

The original store has been added on 30 times; now ther are three other locations. Although its stores only sell about 2000 different items (compared to over 30,000 in traditional grocery stores), in 1992, the Guinness Book of World Records included the store for "the greatest sales per unit area of any single food store in the United States." For the past three years, Fortune magazine has named it one of the top 100 companies to work for.

All the more remarkable considering the company's big troubles in the early 90s. " In 1991, just as we were opening in Danbury, the IRS raided our store. My father and two uncles ended up going to prison. That wiped the whole family out, just about. My brother had left, and one of my top buyers left for a great offer. We had no management left. The bank put us on COD. It was hairy. I didn't know if we were going to make it.

"I'd just lost my son [in a backyard drowning, making Stew, Jr. a crusader for water safety] which put it in perspective. It's not death. But I felt a huge responsibility. The whole family's paycheck was depending on this business. And then the state jumped in with weights and measures. We had auditors just piling in." Ironically, all this was going on just as Stew, Jr. was completing the mountain of paperwork as a finalist for the Malcolm Baldridge excellence award; he withdrew the application.

But the weights and measures charges were dropped, and the company rebuilt. And developed a fiercely loyal following by providing customer service above and beyond what anyone could expect—and not just at the returns desk.

When a customer ordered too little food for a party, an employee jumped in his truck and drove a tray over, refusing payment.

Another employee opened the story an hour early, just so the customer could pick up the food for a co-worker's birthday celebration on her way to work.

All of it—the customer service heroics, the tax trials, and of course, the rock stories - was delivered as upbeat entertainment. Leonard's description of dealing with shadowy Yonkers and New York City powerbrokers like Joey Pots and Pans, who "encourages" Leonard to carry his new line of spaghetti sauce, had the audience laughing out loud. Leonard has performed the same bit at Caroline's, a New York comedy club, earning $10,000 for Stew Leonard III Water Safety Foundation, his water safety charity— which is also receiving his honorarium for speaking at the Family Business Center.

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