Recently, the HVAC unit in my apartment sprung a leak. This came after my numerous calls to the community managers warning that the thing was making unfamiliar and unsettling noises. Instead of responding to my initial complaint before it became a full-blown leak, they chose to ignore it. The result: It sprung a major leak, I missed days of work, I waited for repairmen who never showed, and I was disappointed with the entire process.
Based on my experience as a tenant, I've established an opinion about where I live -- an opinion I will carry with me until my lease expires and I head for the hills.
You may be wondering how this has anything to do with investing.
The water-cooler effect
Well, investment writer Philip Fisher reminds us of the importance of "scuttlebutt." Repurposing the word's nautical meaning, Fisher likens scuttlebutt to a place to be or hang out, and he stresses that that's something we should all do as consumers and investors alike: observe, listen, take notes, and spread the word.
Aha! As a consumer, I observed a problem with my HVAC unit, listened as the community personnel made false promises, took notes on how they mismanaged the situation, and formed an opinion on the company running my complex. And as an investor, I will now avoid Archstone-Smith (NYSE: ASN ) , the publicly traded company that owns my apartment complex. Although the stock has done well recently, if it runs all of its apartment communities this way, I'll do well to steer clear -- and to make sure I spread the not-so-positive word.
But we must remember that consumer experiences work both ways. A satisfied customer can be a company's -- and shareholder's -- greatest asset.
The fantastic four
In a recent BusinessWeekarticle, research consultant Jeneanne Rae described how customer experiences are broken into four areas that can make or break a company. Rae concluded that a company that can deliver consistently positive consumer experiences will create:
- Raving fans.
- Brand loyalty.
- Premium pricing.
- Product differentiation.
Fool co-founder David Gardner recently echoed Rae's principles. He highlighted the importance of company culture, both as a consumer and investor. Examining the disconnect between competitors FedEx (NYSE: FDX ) and United Parcel Service (NYSE: UPS ) , he wrote, "Even in seemingly similar companies, clear contrasts exist in the dynamics of their corporate cultures -- contrasts rooted in history and in founders' visions and actions. Because, you see, company cultures and principles have real consequences to shareholders."
The wow factor
Just as David observed the differences between the two carriers, investors can witness disconnects in their everyday lives. Starbucks (Nasdaq: SBUX ) sure comes to mind in the brand-loyalty category. What other company can charge $4 for a latte and keep people coming back for more? Or how about Coach (NYSE: COH ) ? The retailer demands a hefty price for a clutch but keeps its customers -- and shareholders -- happy. And in the organics market, Whole Foods Market (Nasdaq: WFMI ) charges a premium for its products but has mastered the consumer experience.
With any company, we must not be too quick to draw firm conclusions -- positive or negative -- based on our initial observations.
The Foolish bottom line
As you research possible investments for your portfolio, think of how each company treats you, its customer. Fisher reminds us to observe, listen, take notes, and spread the word. And Rae cautions that a company that fails its customers will ultimately fail its shareholders. Sounds like good advice to me.
I've provided but a short list of companies that get it right for their customers. For additional examples of firms that know how to wow -- and create the ultimate "experience" along the way -- I turn to David and his brother Tom. Together, in the Motley Fool Stock Advisor newsletter service, they uncover companies with a history of satisfying customers and shareholders alike. Satisfy, indeed: Since inception in 2002, their recommendations have outperformed the S&P 500 by more than 44 percentage points.
To join them for a 30-day free trial of the service, including access to today's semiannual review of all of Tom's picks -- click here. I know you'll be satisfied.
Jill Ralph owns shares of Whole Foods. Whole Foods, FedEx, and Starbucks are Stock Advisor recommendations. UPS is an Income Investor pick. The Fool has a disclosure policy that always satisfies.