Tsingtao China Brewery: The Customer is our Boss
I was reading the latest edition of the Harvard Business Review when I came across an article by Jin Zhiguo, the Chairman of the Tsingtao Brewery in China. The article was about how he took a State Owned Enterprise and turned it into a profitable business, for those interested the article is call “Tsingtao’s Chairman On Jump-Starting a Sluggish Company” HBR Reprint R1204A (April 2012, pp.41-44).
Tsingtao employs 35,300 staff and is based in Qingdao, Shandong. The business was founded in 1903 and in 2010 the business revenue was ¥19,898M (US$3,158M) and net income ¥1,584M. This is considerable up from 2006 when turnover was just ¥10,506M and net income ¥435M.
For the beer connoisseurs reading Tsingtao is a clean crisp lager beer that has a mid-amber colour and generally keeps its head through the entire glass of beer. Tsingtao is best with spicy food and is such an easy drinking beer that you will find that a couple are never enough.
Now, back to the article. The key aspect for me out of the article was Zhiguo’s statement that the “customers are my boss” and that this helped to frame his context of how to improve this company to double their revenue and to triple the net income during his tenure.
Customers Are My Boss
Zhiguo cut his teeth in the Tsingtao subsidiary brewery, Hans, where he managed the sales staff. What he wanted to do was to get close to the customer, the restaurant owners and the salespeople to find out what people were saying about his product.
When he was in a restaurant or a food stall he would talk to the owners and staff to find out about his product and at the end of the evening he would count the empty bottles and take note of the brands. If the owners didn’t carry Hans he would ask why.
This market research led him to understand what people wanted. The three brands in the local market weren’t all perfect; some were too bitter, too light or had too much sediment, so he changed the Han beer to aim for a beer that wasn’t too bitter, not too light and sediment free. He also found out that the local people like spicy food, so he paired back to alcohol content so that people could enjoy more beer and complemented their food better. Finally he understood that local people liked cold beer with their spicy food. All the beer was delivered warm to the restaurant and then the owner would need to chill it. Instead Zhiguo converted an empty warehouse into a refrigerator and started delivering beer chilled, saving the restaurant time and money.
Han was a subsidiary of Tsingtao and during this time production increased from 1,000 bottles a day to 790,000 and profit had increased from a loss of ¥25M per year to a profit of ¥50M per year, all through listening and serving the customer.
A Personal Example
A couple of years ago I became concerned that my distribution network wasn’t working as effectively and efficiently as it should have been and as a result we weren't delivering on our promise to serve the customer.
To get close to the customer I went into every shop within the network (all 22 shops and 6 contact centre teams) to understand what was going on. What I discovered was that we had a fantastic product offering suite and that these products and services were things that our customers wanted and trusted our brand to supply.
What I also discovered that we weren’t necessarily focussed on the customer but on self. The two major things that I discovered were:
- Staff were spending more time in the back office doing activity that was nice to do (eg Administration work) and weren’t focusing on attending to the member. SOLUTION – re-engineer our processes so that we got admin work to under 30 minutes per day and to do it in a ‘downtime’ period
- Customers weren’t being greeted as they entered the shop. SOLUTION – create the role of floorwalker within the shop who’s role is to greet customers using the Friedman 360 degree walk pass and finding out what they needed and getting them to the right consultant
The second point was an interesting discovery. Our largest shop also had the most complaints because we had two entry doors customer were unsure where to queue and felt that we weren’t serving in order. The complaints had suggested that we have a machine that gave out numbers or we set up queuing mazes. I thought we could do it a better way.
Now, I’m not authorised to sell our complex products but I can still serve through helping out our customers that come into the shop. So on the day of the experiment I became the greeter. Everyone that entered the Shop got the Friedman welcome and I found out what they were there for. If I had a consultant free I would take the customer to the consultant, introduce them and do a summary of what they wanted as well as adding an add on upfront. When we were queuing I informed the customer of the approximate wait and how far behind they are in the queue. I also said that I would get them when it was their turn and that they could feel fine and safe to browse without losing their place in the queue. Once I had a free consultant I explained to the other customers that this customer was waiting the longest and then introduced them to the consultant. If the transaction was simple eg I want a map I delivered on this immediately.
The outcome was that we sold more upgrade add ons that day, most of the customers queuing bought additional items from their browse time and we had a happy shop with happy customers. It worked so well that this is now a role across the business and the complaints have now stopped.
The lesson that we get from Zhiguo is that the customer is our boss and we should get as close as possible to the customer to deliver a product or service experience that they want.
In 2001 Zhiguo became the CEO of Tsingtao and bought this philosophy that he developed at Hans to this brand and helped it to become a world recognised brewer of quality beer that complements the flavours and taste of not only Chinese consumers, but also of beer fans from around the world.
And remember the Customer is actually your Boss – if they don’t buy you won’t have a job. Cheers Michael