September 2002, V. 4, No. 2

Good Afternoon!

I would like to take this opportunity to welcome you to the first LRA Worldwide e-Newsletter. Many of you have been receiving our printed versions for the past few years. In keeping with the times, we thought that e-mail distribution would allow us to share customer loyalty information with you more often and be more convenient for you.

I hope you enjoy the first edition. Please be sure to give us your comments, questions and suggestions in the e-Feedback section. Please feel free to contact me at any time at +1.215.957.1999 ext. 26 or dandrews@lraworldwide.com.

Best Regards,

Debra Andrews
Director, Sales & Marketing

Spotlight on Customer Loyalty: Trouble at McDonald's By Rob Rush

It seems that McDonald’s has a super-sized challenge on its hands. McDonald’s recently reported disappointing profits for the sixth consecutive quarter as management has repeatedly failed to meet their projections. Its stock price is down 42%. Major institutional investors are selling and analysts are downgrading the stock. And while McDonald’s, one of the bluest of the blue chips, is suffering, the 2002 S&P Restaurant Index is up 18%, even in this turbulent market. Wendy’s and Tricon Global, owners of the KFC, Taco Bell and Pizza Hut brands, are near 52-week highs.

What’s even more disturbing then the economic bad news is McDonald’s rapid decline in their customer satisfaction ratings. According to a recent University of Michigan customer satisfaction study, McDonald’s now trails Burger King and Wendy’s in customer satisfaction rankings in their core North American market. On any given day, 11% of McDonald’s customers are dissatisfied with their visit and some take the time to complain to the restaurant.

The company's poor ratings are attributable to rude employees, slow service, wrong orders, dirty stores and product that does not resemble pictures in advertisements. One McDonald’s influential franchisee indicated that “most customers that have complaints do not share it with the restaurant-they just don’t come back.” As a result, over ½ of all customers are reducing their store visits, costing the company over US$750 million per year. It seems that McDonald’s may have lost touch with the company’s slogan, “We love to see you smile.”

Jack Greenberg, McDonald’s CEO, recently told attendees at their worldwide convention in Las Vegas, “The numbers speak for themselves. We’ve added over 2,500 restaurants since 1994, and yet our customer counts have stayed the same. Cash flow and sales have been relatively flat or declining over the same period. We have to improve our customer’s experience.”

Perhaps McDonald’s has forgotten the simple value proposition introduced by their founder, Ray Kroc, many years ago: McDonald’s stands for “friendliness, cleanliness, consistency, and convenience.” Customers don’t go to McDonald’s for taste tantalization and culinary delights; they go because they know what they are going to get. It’s also cheap, predictable and fast, all core benefits valued by their customers. The magic of McDonald’s has been that no matter where you traveled, it was delightfully and comfortingly the same.

Attention McDonald’s headquarters in Chicago: We go to your restaurants because, quite simply, we don’t want a surprise. In certain areas of our lives, we (your customers) embrace ‘sameness’ as an antidote in a confusing world. We don’t need innovative new menu items like Eggs Benedict or bratwurst; we just want McDonald’s.

As most good brand managers know, it’s critical to keep your promises! At McDonald’s, their value proposition is their promise, their bond. And their customer’s have every right to expect that McDonald’s will consistently deliver on that promise. Over time, poor customer service leads to poor economic results.

At LRA Worldwide, we have a simple definition for customer loyalty: it’s the positive gap that exists between a customer’s expectation and his/her actual experience. And because customer loyalty has a lot of very positive benefits, generating and retaining customer loyalty is a worthy objective.

Like McDonald’s, sometimes brands drift away from their core values. A company’s brand promise and value proposition helps everyone keep their eye on the ball. Talk is cheap! It’s easy for a company to make promises, its entirely another thing to consistently deliver on them. Keep your promises and you’ll keep your customers! Rob is President & CEO of LRA Worldwide. He can be reached at +1.215.957.1999 ext. 16 or rmrush@lraworldwide.com.

LRA Worldwide Introduces:
The 5-Star Customer Loyalty Solution^SM

LRA is in the business of helping our client’s build and retain customer loyalty. Building customer satisfaction and loyalty requires that a customer’s experience consistently meets or exceeds their expectations. Companies cannot simply make promises to customer’s…they need to be delivered. We call this “walking the talk!” It’s a basic concept, but very difficult for many companies to achieve.

Why? Because meeting and exceeding a customer’s expectation requires a customer-centric culture, operational excellence and a solid game plan. The standards that define your brand need to be developed and implemented; the people that deliver your brand need to be carefully recruited and properly trained; and you need to continually measure your performance in order to get better.

LRA Worldwide’s 5-Star Customer Loyalty Solution^SM is our philosophy for helping companies focus on meeting and exceeding their customer’s expectations, thereby building and retaining loyalty. Our products and services help make sure that our client’s brand promise is consistently delivered to the customer. If any of the components in the 5-Star Customer Loyalty Solution^SM are not properly aligned and integrated, companies run the risk of losing their customers.

The 5-Star Customer Loyalty Solution^SM

Our 5-Star Customer Loyalty Solution^SM helps our client’s deliver 5-Star experiences. Each bullet point on the star is a service that we provide. To learn more about any of these services, please contact Debra Andrews at dandrews@lraworldwide.com, or by telephone at +1.215.957.1999, ext. 26. Look to LRA Worldwide to help you get the most from your customer loyalty efforts.

Read Rob's Article in Brandweek Magazine:
Brand Management - Grateful Dead Style

What can brand managers learn from band managers? Plenty. Just consider the Grateful Dead, one of the world’s legendary rock bands. Although the Grateful Dead embraced the hippie culture, they did so with a laser-like focus and understanding of the benefits of long-term brand management. Rob Rush, President & CEO of LRA Worldwide, wrote an article published in the August 12, 2002 issue of Brandweek Magazine. Click here to read the full story in Adobe Acrobat .PDF format.

LRA News

LRA continues to grow around the globe. We are pleased to announce two new or expanded client relationships!

Grupo Posadas Partners with LRA Worldwide to Help Enhance the Fiesta Americana and Fiesta Inn Brands
New Brand Performance Program to Measure andImprove Guest Satisfaction and Brand Loyalty

MEXICO CITY, D.F./HORSHAM, Pa., August 1, 2002— Grupo Posadas, S.A. de C.V., the leading hotel company in Latin America, announced today that it has retained LRA Worldwide to design and implement a customized brand performance and quality assurance program to enhance the company’s flagship Fiesta Americana and the Fiesta Inn brands. With a focus on creating memorable customer experiences and improving operational excellence, the program, called Sistema Prometeo, serves as a basis for enhancing guest satisfaction, brand loyalty and hotel profitability. (read full story)

For more information on Grupo Posadas, click here.

WestCoast Hospitality Corporation Partners with LRA Worldwide to Further Enhance Their Lodging Brand
Innovative Quality Program to Measure and Enhance Guest Satisfaction and Brand Loyalty for WestCoast and Red Lion Hotel Brands

SPOKANE, WA/HORSHAM, PA., July 15, 2002 – WestCoast Hotels, a unit of Spokane-based WestCoast Hospitality Corporation (NYSE:WEH), today announced that the company has retained LRA Worldwide to implement an innovative quality assurance and performance measurement program for their hotel portfolio. WestCoast Hospitality Corporation owns, manages and franchises more than 90 hotels in 16 states, trading under the WestCoast Hotels and Red Lion Hotels and Inns brand names. (read full story)

For more information on WestCoast Hospitality, click here.

e-Feedback

This section of our e-Newsletter is reserved exclusively for your ideas, suggestions or questions about customer loyalty and realted topics. If you take the time to e-mail us, we promise to review your information. Also, if you know of any great websites or other resources that you feel would help others who are striving to build and retain customer loyalty, e-mail us those tips as well! We look forward to hearing from you!

Click here to e-mail us your suggestions!

About LRA Worldwide

LRA Worldwide is a leading global provider of integrated customer loyalty solutions. LRA’s services, systems and technology focus on a single business outcome: helping client’s build and retain customer satisfaction and loyalty. LRA Worldwide’s proprietary customer loyalty solutions ensure that companies provide their customers with consistent, memorable and distinctive brand experiences. Products and services include design/development of company standards, customer service/leadership training, quality assurance programs, customer satisfaction-loyalty feedback systems and performance measurement and improvement. The company focuses on industries and sectors where “hospitality” and service excellence are central elements of the brand. Operating in over 90 countries, LRA has a broad global reach with regional offices located in the U.S., Europe, Middle East & Africa and the Asia-Pacific regions. For more information, visit the company’s website at www.lraworldwide.com.

For further information, please contact:

Contact: Ms. Debra Andrews
Tel: +1.215.957.1999, ext. 26
Fax: +1.215.957.6570
E-mail: dandrews@lraworldwide.com