Case 1:

Luxury Doesn't Just Happen: The Ritz-Carlton Hotel Company

The president of the United States gives only one award for quality in businessthe prestigious Malcolm Baldrige Award. So it's a big deal to win it. The Ritz-Carlton Hotel Company did so in 1999. How did they do it? Research! When the U.S. Department of Commerce selected Ritz-Carlton for the award, it cited the premium hotel chain's extraordinarily detailed understanding of its customers and operations as a primary reason for giving the award.1

"What we get from data is essential," said John Timmerman, former vice president of operations for the luxury hotel chain.2 But the Ritz isn't interested in numbers for numbers' sake. It wants to turn the numbers into actionable behaviors that improve the customer experience. "To be agile in any marketplace, especially one that changes as rapidly as ours, means being a learning organization," said Timmerman. "If you can't define it, you can't control it, you can't measure it, and you can't improve it."3

Ritz-Carlton is fanatically detail-oriented, so the data it collects is broad and deep. It identifies and documents procedures for quality improvement (QA) and problem solving, makes sure that experts review all its methods of data collection and analysis, and establishes high standards for success. It uses three types of comparative data: 1) comparisons to its industry and foremost competitors, 2) benchmarks established by the industry, and 3) benchmarks established within the company.4

One of its ongoing research tasks is to identify problems before they occur. According to its application for the Baldrige Award, by 1999, the Ritz had identified no fewer than 970 potential problems that could arise during interactions with overnight guests and 1,071 potential issues that might occur during interactions with meeting-event planners. Each potential issue is flagged, a solution is created, and all employees are trained how to handle the situation should the potential ever become actual.

Even the most subjective data is collected and useddata that other businesses would ignore as too subjective. For example, subtle reactions of guests to specific decor, services, or entertainment are noted and fed into the river of data that is used to establish business priorities. "As a result, the hotel can pick up on information that might have been easily missed," said Timmerman.5

Sometimes, the results of its research contradict conventional wisdom. In a Forbes.com interview, former Ritz-Carlton President Simon F. Cooper said, "A breakthrough in our thinking was understanding that we are not a hotel brand but a lifestyle brand."6 This was a hugely inspirational realization for Ritz-Carlton, because, for a hotel company, growth relies on developing new properties in new places. That puts limits on growth. But as a lifestyle brand, former Ritz-Carlton can offer any number of products and services. Suddenly the possibilities were endlessand as researching the lifestyles of its customers was something it had been doing for years, it had amassed a wealth of data to back up new strategies. So it launched vacation packages, spa "experiences," and executive gifts and incentives.

Of course, many if not most companies make some attempt to research their markets, survey customer satisfaction, and measure employee engagement. But where Ritz-Carlton truly excels is not merely in the amount of data it acquires, but also in how it disseminates results throughout the organization in ways that actually drive the business forward. Data isn't just kept in reports on some executive's desk. Instead, Ritz-Carlton analyzes the ocean of data and incorporates its understanding of changing customer and market requirements into business decisionsand then involves the entire workforce to take action. This information is disseminated in a variety of ways: through formal classes, electronic communications, and printed materials, but most commonly through face-to-face interactions.

For example, at the Ritz, every employee in every location participates in a daily preshift meeting in which the top priorities and goals are presented and discussed. Result: Everyone is always informed, and on board, with the latest strategy. Most important, all employees understand the particular ways that they, personally, contribute to reaching the goals.

Through research, the Ritz-Carlton clearly leaves little to chance. By knowing its customers, its industry, and its markets, it ensures that it maintains a competitive edge.

1.What types of information do you think would be most useful to a luxury hotel company to improve its performance and profitability?

2.How does research for an existing company differ from the kind of research needed for a prelaunch venture?

3.Why is it important that the results of research be shared throughout a company?

4.Can you think of examples of other companies at which doing research on customers' lifestyles might affect their choice of product offerings?