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The Ritz-Carlton’s Famous $2,000 Rule

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The Ritz-Carlton's Famous $2,000 Rule | Customer Lifetime Value | Bell Desk

How much would you empower your employees to serve your customers? The Ritz-Carlton has put a number to that very question.

If you’re one of their customers, the good news is that…

The Ritz-Carlton Will Spend $2,000 To Make You Happy

Known as one of the gold standards of customer service, the Ritz Carlton has been rightly studied and dissected over the years in an attempt to find the “secret” Ritz sauce. Entire books have been written just on the Ritz’s customer service.

One aspect of the Ritz’s service that has received a lot of coverage is the fact that the Ritz empowers its employees to spend up to $2,000 to solve customer problems without asking for a manager. Yes, you read that right, Ritz-Carlton employees can spend up to $2,000 per incident, not per year, to rescue a guest experience.

What is interesting about this famous number is that the majority of authors who mention it leave out an equally vital statistic. You see, the $2,000 is always mentioned in the context of how important employee empowerment is to great customer service — as if empowering employees to excess is the key to a profitable and successful business.

What the authors often leave out is this: the average Ritz-Carlton customer will spend $250,000 with the Ritz over their lifetime.

Like any smart, profitable organization, the Ritz did not pull the $2,000 figure out of thin air. The Ritz has studied its customer base and understands the value of the relationship with their customers and what they are willing to do to maintain those relationships.

When you take into account that the customer lifetime value of a Ritz-Carlton customer is a quarter million dollars, the $2,000 does not seem so hard to conceive.

The Ritz-Carlton values relationships over transactions, and for anyone who has ever stayed at one of their properties, that is no secret.

Knowing that your business probably doesn’t have a $2,000 per-incident budget for service recovery, it’s important to focus on how your business can use the same principle to your advantage.

It begins first by embracing the idea of a relational approach over a transactional approach.

When organizations approach their customers relationally, they do not attempt to extract every possible advantage from each transaction. They empower their teams to make things right in the moment, even it it results in an unprofitable interaction at the time.

These organizations know that in the long run they will be rewarded with loyalty and that the customer relationship they will preserve is worth far more than any individual transaction.

Far more.

For more on the $2,000 rule, check out this follow-up video:

To learn more about employee empowerment, make sure to check out our Ultimate Starter Guide to Employee Empowerment.

About the Author Adam Toporek

By Adam Toporek. Adam Toporek is an internationally recognized customer service expert, keynote speaker, and workshop leader. He is the author of Be Your Customer's Hero: Real-World Tips & Techniques for the Service Front Lines (2015), as well as the founder of the popular Customers That Stick® blog and co-host of the Crack the Customer Code podcast.

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