Company: Rackspace
Contact: Razil Suarez, Marketing Manager
Location: San Antonio, Texas
Industry: Web services, B2B
Annual revenue: $224,000,000
Number of employees: 1700

Quick read:

With Web hosting becoming a commodity, Texas Web hosting firm Rackspace realized it needed to stand out from the pack. Its founders decided Rackspace would become a different kind of hosting company—one that would stake a claim to "fanatical" commitment to customer service.

But simply making the claim is not enough to ensure the necessary level of service. Hence, Rackspace wove the concept of customer service into its very business structure, ensuring that every employee, from billing associates to IT technicians, had an equally firm commitment to customers.

Company officials even trademarked the term "Fanatical Support."

And it has worked: The firm's reputation for good service has attracted a steady clientele, and revenues grew from $139 million at the end of 2005 to $224 million at the end of 2006. Rackspace now employs 1700 workers, up from just 750 at the end of 2005.

The challenge:

Web hosting is a crowded space. "What we're doing is not rocket science," admitted Razil Suarez, marketing manager for Rackspace, a San Antonio, Texas-based firm that claims to be the fastest-growing managed-hosting specialist in the world.

One of Rackspace's biggest challenges has been to maintain the focus on customer service even as the company has grown rapidly since its inception in 1998.

"We have to make sure that as our business explodes, we don't explode with it," Suarez said.

The campaign:

Paying lip service to the focus on customers was not enough to get a solid reputation. Rackspace needed to create a culture that was based on fanatical support. With that in mind, the company took certain steps to ensure customer satisfaction:

Step 1. Compensate employees based on the customers' experience

Rackspace's support staff—all the way from the highest level of support down to the individual responsible for billing the account—receives bonuses based on interactions with customers.

When a customer calls with a problem, the support staff creates a "ticket," which is then used to chronicle each step of the process until the problem is solved. Tickets cannot be closed by support staff—only the customer can say when the problem has been resolved.

Customers are routinely surveyed, and their answers are tallied to come up with a "net promoter score." Bonuses for support staff are determined based in part on that score. Customers who leave Rackspace are also surveyed; the resulting scores, too, help determine employee bonuses.

Such steps help ensure that Rackspace really does offer the "fanatical customer support" that it touts on all of its marketing materials.

Step 2. Promote "core values" among employees

Rackspace has five core values that are considered the foundation of the company:

  1. Treat "rackers" like friends and family.
  2. Have a passion for what you do.
  3. Embrace change.
  4. Offer fanatical support in all that you do.
  5. Be results-oriented.

Company officials make sure that each employee is familiar with those values, which are posted throughout the company as reminders. "We even have T-shirts with the values on them," Suarez said.

Step 3. Launch short-term marketing campaigns

Because the company is so results-oriented, marketing campaigns are always short-term, so they can be terminated if they are not showing good results. Suarez might buy a banner ad on The Wall Street Journal for a month, for example. She monitors the results, and if the leads' revenue return doesn't cover the contract amount, the campaign is ended.

Step 4. Turn down work if it doesn't align with company goals

It is not unheard of for Rackspace to turn down clients—even big ones—if the work doesn't match the company's long-term goals.

One Fortune 500 client was looking for a solution that was outside the realm of what Rackspace normally offers, Suarez recalled. "They were willing to pay us a significant amount of money to have us do it. But we didn't have the measures in place to support this customer the way we wanted to support them," she said.

"It would have taken a huge amount of resources to support the customer in typical Rackspace fashion. So even though it would have been nice, we looked at our model and said, 'Is it worth all this revenue when it doesn't make sense for us?'"

The answer, company officials decided, was no. They told the potential client "thanks for the opportunity, but no thanks."

The results:

Rackspace's laser-beam focus on customer support has helped it significant revenue gains. From $139 million at the end of 2005 revenues jumped to $224 million in 2006, and the firm has more than doubled the number of people it employs: from 750 at the end of 2005 to 1700 today.

"We're doing incredibly well," said Suarez. In fact, she said, the company has stopped saying that "month over month it's been a record-breaking month," because the phrase was used so often that it lost its meaning.

Simply put, she said, "Our cost per lead is going down, and we're becoming smarter with marketing activities. I'm very happy with the results."

Lessons learned:

1. Ad tracking is vital

"We can have a campaign that has horrible clickthrough, and sometimes we'll keep it," said Suarez. Why? Sometimes, the revenue generated by even a small number of leads will still make the campaign worth keeping.

So Suarez's team tracks nearly everything imaginable to make sure the ads get across the idea of Rackspace's fanatical customer support: the clickthrough rate, the amount of traffic an ad brought in, how many leads a campaign generated, how long a lead spent in a live chat, whether they were qualified leads, and if they weren't qualified, why not?

Such tracking allows company officials to better target their campaigns. If an ad on a Web site brings in a high number of leads, but those leads are more cost-conscious than leads from other places, Rackspace considers altering the message of that campaign in order to reach more cost-conscious customers.

2. Find your niche and stick with it

Though "fanatical customer support" may sound like a gimmick, so much so that the phrase was trademarked, customers began identifying Rackspace with that theme.

Now Rackspace maintains the theme on many levels: on its Web site, through customer testimonials, throughout its offices and even on employee T-shirts.

And that approach has helped Rackspace stand out in a crowded field.



Note: uses Rackspace for Web hosting and pays usual rates for its services.

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