Research that links employee engagement to customer loyalty

Every company needs customer loyalty. So it is no surprise that the majority of companies are continually look out for ways to improve their customer experience. That search has taken business leaders to the four corners of their business in the past, but rarely has the search looked at employees. But things are changing, many organisations are now looking at evidence that indicates the customer experience is actually closely linked to employee engagement. This blog highlights four key pieces of research that help explain the link between loyal customers and engaged employees:

1. Better product quality

A high-quality product is a pretty good starting point for creating and keeping customers. Engaged employees take more care and pride in their work than employees who are disengaged; potentially that can have a big impact on the quality of the end product.

A study carried out by human resources consulting firm DDI looked at the relationship between employee engagement and product quality and showed that higher engagement results in fewer quality errors, a smoother workflow and a more positive experience for the customer. Their study refers to an unnamed Fortune 100 company who decreased the number of quality errors from 5,658 to – incredibly – only 52 per 1 million products by introducing an active employee engagement strategy.

2. A greater focus on meeting customer needs

Go back in time to 1994 and you’ll find the Harvard Business Review explaining why engaged employees make for happy customers (which in turn makes happy shareholders). Fast forward to 2017 and that’s still holding true. Research from the Institute of Customer Service shows that higher employee engagement levels boosts customer satisfaction. It found a one point increase in employee engagement was likely to give a 0.41 point uplift in customer satisfaction.

According to a study by Matthew Gonring there’s a link between engaged employees and increased customer loyalty and satisfaction (Gonring M.P. (2008) Customer loyalty and employee engagement: an alignment for value – The Journal of Business Strategy, 29(4), 29-40). Engaged employees care about meeting customer needs and are more likely to view their organisation as having a stronger customer focus than a less engaged employee would. The way frontline staff come across to customers is effectively a product of how engaged they are.

3. Improved employee engagement dialogue leads to better outcomes for employees and customers

New York retailer Saks Fifth Avenue wanted a way to improve its employees’ performance and make the company more competitive as a result.  It took a careful look at the correlation between employee and customer engagement. Encouraged by what it saw, the company implemented employee engagement measures based on constructive dialogue between the Saks sales force and management focusing on what employees needed from the retailer to help them do their jobs as well as possible.

These measures were implemented and engagement increased. Engaged employees went the extra mile to deliver, improving the whole consumer experience as employees dealt with customers in a more efficient manner. The company saw a significant improvement in customer engagement, loyalty and sales – higher employee engagement was attributed to having increased sales by up to 25% in some of their stores – as a culture of dialogue embedded itself at the retailer.

4. Employees become trusted brand ambassadors

When an employee is engaged, they become an advocate for a brand. They value the benefits of a company’s products or services and are enthusiastic when dealing with customers. Given that virtually every customer’s first point of interaction is through employees, a good first impression can be a make-or-break experience as to whether they come back again. With research from the 2017 Edelman Trust Barometer suggesting customers are looking more towards employees than CEOs when it comes to understanding a company, it looks like the influence of employees on customers is going to become increasingly fundamental to business success – so it’s more important than ever to make sure those employees are engaged.