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There's a link between employee engagement and customer loyalty

March 14, 2014

Through a special arrangement, presented here for discussion is a summary of a current article from LoyaltyTruth.com, a blog published by Hanifin Loyalty.

In the February issue of Direct Marketing, one part of the feature story, "Fickle About Loyalty," that particularly caught my attention was the statement that customers may not be "the only stakeholders to focus on when the goal is to improve customer loyalty." The implication was that employees are equally critical.

An often-cited Gallup study from 2011 showed that only 30 percent of U.S. workers employed full- or part-time are engaged in their work and workplace, while approximately half are not engaged. Nearly one in five were actively disengaged.

How does it affect loyalty programs? When asked by a store associate, cashier, or salesperson if I'd like to join their rewards program, I habitually ask them, "What's it about," "How does it work" and "Is it "worth joining?" The responses range from a shrug accompanied by a "Whatever" to enthusiasm that makes me feel like I'm about to take advantage of a great opportunity.

It's easier said than done to expect front-line personnel in a business to be enthusiastic promoters of the business itself. Generally speaking, the front-line people are in the lowest pay bands and many feel that they are being manipulated by reduced hours and inconvenient schedules.

In an interview with LoyaltyTruth, Paul Hebert, a lead consultant with Symbolist and an expert in the behavioral arts and employee engagement, believes it's unrealistic to aim for fully engaged staffs, but feels stores should "begin measuring — with whatever tool you find helpful — and then start working to move the needle."

An often-missed first step is eliminating the causes of disengagement before trying to "engage" anyone. Causes could be management practices, pay/benefits not in line with the industry, or friction within the work environment setup.

Once the disengagement drivers are addressed, the push toward engagement should find ways to:

  • Give employees input in their job structure and activity;
  • Give employees some flexibility in "how" they accomplish an objective;
  • Show progress in their jobs and their careers;
  • Transfer some responsibility for engagement to the employee;
  • Reward and recognize their contributions and make it visible in the organization.

"The keys to engagement are pretty universal — but they manifest differently at each organization," said Mr. Hebert. "Don't think you can put together a Zappos program at a 100 year old manufacturing plant. Not going to work."

Discussion Questions:

To what extent do you think employee engagement is tied to customer loyalty? What do you see as the largest causes of disengagement and what tips do you have for improving it?

While we value unfettered opinion, we urge you to show respect and courtesy for people or companies about whom you comment. Keep in mind that this is a public, professional business discussion. RetailWire reserves the right to edit or refuse the publication of remarks that we deem unsuitable. We may also correct for unintended spelling and grammatical errors.

Instant Poll:

Which of the following is the most common cause of store employee disengagement?


A fully engaged customer-facing retail associate can drive a lot of loyalty. Keys are to treat each of these employees like they matter, pay them a reasonable wage, work with them on personal issues such as flex hours, and reward them in a variety of ways for what they accomplish. Pat them on the back often, and treat them as well as you want them to treat your best customers. Red tape and corporate policies/bureaucracy often get in the way.

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Al McClain, CEO, Founder, RetailWire.com

Loyalty is built on trust and positive experiences. Customers need to feel valued. So do employees. Creating customer loyalty, in large part, rests with employees.

Employees disengage when they don't feel valued. Low pay, unappreciated input and lack of advancement all contribute to disengagement. Every retailer talks about building employee value, but few actually do something about it.

Efforts to build employee morale should begin with paying a living wage and continue with feedback loops (for both the employee and employer). Happy employees make happy customers.

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Max Goldberg, President, Max Goldberg & Associates

Employee engagement is critical as noted in the article. Over 20 years ago, Hal Rosenbluth wrote a book on this topic, "The Customer Comes Second." In my research I discovered that pay and benefits are not the number one motivating factor (although the absence of pay and benefits can be demotivators). Instead the top two positive attributes were: being in on things and being treated with respect.

My recommendation to companies is to treat your employees the way you would like them to treat your customers.

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Richard J. George, Ph.D., Professor of Food Marketing, Haub School of Business, Saint Joseph's University

I think I'm depressed. I feel like everything said here is basic employee management 101. So the fact that someone feels like it needs to be said tells me a lot about the state of employee management in retail - and the state of loyalty.

Consumers tell us over and over and over again that what they really want from stores is more employee help. But that help actually has to be helpful. And so when retailers put disengaged employees out on the floor, the consumer response is "I'd rather just do it myself, thanks" and retailers point to that response as proof that consumers don't actually want employee help, they want self service.

And the cycle repeats.

Store employees are disengaged because they don't get enough hours to meet their personal needs. Some work two or more jobs and risk losing one or the other from scheduling conflicts, a lack of sick days or personal time off, and low pay. And my personal favorite, having witnessed it in action myself, is "de-scheduling" - not firing bad workers, just giving them the absolute minimal hours until they quit. Nothing like having a passive-aggressive battle going on in front of the other employees who are just trying to help customers. What a morale booster!

Not every retailer does this, but these practices are enough of a problem that researchers have documented it. I've seen two great reports in the last year from universities that focused on the challenge retail store employees face. Typical for me, I wish I could remember who and where. But it's worth a try at Google to find them.

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Nikki Baird, Managing Partner, RSR Research

Employees are your brand's best ambassadors and are absolutely critical to the development and maintenance of customer loyalty. Your front line employees are the most significant and valued difference between any online interaction and a 'brick n mortar' environment. Meaningful human interaction will always trump any digital experience and should therefore be taken very seriously. Take that same meaningful human touch and empower it further with digital cross-channel technologies and you have a tremendous edge on your competition. Associates that interface personally with your customers are your most valuable assets. Empower them! Giving them a reason to believe and be enthusiastic about your brand, along with a voice to share and tell your brand story is an extremely compelling and winning formula!

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Adrian Weidmann, Principal, StoreStream Metrics, LLC

Engaged employees are a retailer's best asset to differentiate value, and increase both sales and consumer loyalty.

Unfortunately, employees in most stores are rarely treated as an "asset". It's more likely that retailers in trouble are treating staff as an "operating expense". And that feeling of being treated as a cog in a machine comes through loud and clear on the front line.

Most of floor sales people are "millennials". Millennials like to be engaged and part of the process, part of a community. Retailers can go a long way to improving consumer experience if they simply ask staff how they would improve the store ... and show genuine respect by testing some of their ideas.

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Chris Petersen, PhD, President, Integrated Marketing Solutions

"Loyalty" and "engagement" are not the same thing.

It's called the "cascade effect" and the only shortcoming of this article is we weren't taken up to the source of the disengagement. Employee disengagement produces customer disengagement - that part is true. But it's not merely a matter of employees not knowing how to explain the "loyalty program." It's the permeating energy of a non-engaged or actively disengaged employee...which includes about 70% of employees according to Gallup. The "good" news is it's "leveling off!"

But what triggers the lack of employee engagement? Answer: the lack of executive engagement. In their 2012 study, Gallup found only 36% of executives were considered "engaged" in their workplace. And that's not even "actively engaged," just minimally engaged. What is really shocking is how many executives are "actively disengaged" in their work - that is are actively hurting their own employer.

I'm not interested in testing the folklore that a dead fish starts to stink from its head but whether true or not in the fish world, it is a fitting metaphor when it comes to engagement in the work world.

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Ian Percy, President, The Ian Percy Corporation

How many times and in how many ways does it need to be said that your employees treat your customers the same way you treat your employees?

The list of what people want in a job and any relationship are pretty clear and universal. So why is it so hard for management to figure it out?

I have said it before here. Companies and managers get the employees they deserve and they get the interaction with customers that they also deserve.

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Mel Kleiman, President, Humetrics

In the interest and pursuit of being a contrarian and shaking things up a bit - I will take an opposing view (just to spice things up). I don't care about employee engagement as much as I care about employee BEHAVIOR. Engagement is a feeling or sense of commitment or alignment the employee may have with or to the business. As much as I might want or like that - it is not sufficient to "move the needle." It is the employees' behavior(s) that I seek (as an owner, manager, boss).

So, unless you can show me how engagement changes BEHAVIOR in a positive way - I am not likely to want to measure it, chase it, or want to capture it.

Having said that, I DO believe that if an employee feels that s/he is recognized, rewarded, and has a stake in the performance of the business (beyond just a pay check) - they will go "the extra mile" and THAT will lead to higher customer loyalty (if the employees are not passionate about the business, how can I expect the customers to manufacture that passion?).

Largest cause of disengagement is (pick any):

Secretive or less than completely honest management
Management that says one thing, and does another
Disconnect between rewards and behaviors sought
Lack of recognition
Lack of feedback
Absentee or ineffective supervision

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David Zahn, Owner, ZAHN Consulting, LLC

Employee engagement is critical. All you need to do is visit an Apple store to see the impact employee engagement has on customers and loyalty.

What can you do to help build an engaged team:
1) Hire people that are excited about eating or using what you sell. If you manufacture chocolate, find employees that are passionate about eating chocolate. Apple Store employees are amazing. When I ask a question in store, they almost always come back and share a personal example. This makes a huge difference. Imagine if that employee said, "I am not sure I use a Droid phone. Let me get someone that can help you."

2) Your products or service should be part of the corporate culture. I consulted with a beverage company for years that had a bar in their office. Every Thursday their was a happy hour for employees to socialize and taste the products they proudly sold.

3) Incentive employees with items or services you sell. Another client of mine provided a case of their product to each employee at the end of each quarter.

The ultimate goal is to have your employees feel proud to discuss the product they sell at social events off hours. At a dinner party your employee proudly brings the latest sample of something they make or discusses with excitement the experience they just had with one of the company services. When that happens you increase the size of your sales and marketing team 100 fold.

John Boccuzzi, Jr., Managing Partner, Boccuzzi, LLC

If an owner of a store does not show any example on how to treat their customer, then you will not have engaged employees. I try to spend time talking with customers, and my staff, trying to figure out what is best each day to serve our customers. Even though business is extremely tough, that is no excuse for lacking in customer relations skills.
Make the effort to set the example, and your employees, and customers will notice.

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Tony Orlando, Owner, Tony O's Supermarket & Catering

An employee can only be enthusiastic about a company and its products and services if they feel that the company values and rewards them correctly.

When you have to apologize for lack of staff and shoddy products and you know you're being stiffed in pay and benefits and opportunities, you are less than enthusiastic about the latest sale. It's easy to convey in tone and gesture and asides that the customer should shop elsewhere.

The tips that the company should do are the ones they never do-invest in companies and pay them accordingly, value their input and provide opportunities to move up that are legit and achievable.

Kate Blake, Social Media Manager, Take Five with Kate Blake

This discussion seems far too much focused on mitigative measures.

Getting the right management practice, remuneration and environmental measures in place just meets basic tablestakes. Essentially anything less revokes a retailer's license to operate.

Where a retailer wins is by energizing staff with a powerful brand idea.

Reebok's doing it by uniting its people behind crossfit, redesigning the in-store experience to give staff and shopper the opportunity to participate and better themselves. Trader Joe's did it with a fresh and irreverent retake on grocery store produce and interactions.

If your brand isn't delivering a compelling and differentiating idea to live by, it will engage and inspire neither execs, nor staff, nor shoppers.

Peter Askew, Exec director of strategy, Clear

Simply put, what's happening on the inside of a company is felt on the outside by customers. Therefore, engaged employees are typically fulfilled and recognized for their hard work. Studies prove over and over that the engaged employee will work harder to deliver a better experience for both their internal and external customers.

A couple of causes for disengagement come from lack of appreciation and lack of leadership providing the unified direction of the company.

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Shep Hyken, Chief Amazement Officer, Shepard Presentations, LLC

Interestingly, I received an email today from "thesalesblog" that is very germane to this discussion....

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David Zahn, Owner, ZAHN Consulting, LLC

Having been in this biz for 35+ years, I will NEVER give up on customer-facing staff. There is no question that employee engagement helps drive customer loyalty. Regardless of what format the store is, an engaging store staff is priceless. One of the keys to shopper engagement is a "shadow of the leader" culture in the organization. The store management and the field supervision have to set the tone by engaging shoppers by walking the sales floor often. How often do you see the store manager on the floor in a major supermarket, mass merchant, department store, etc.? Those leaders have to be the examples for their staffs to emulate. Get uncomfortable and make time to walk the floor and see who is keeping your business in business!

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Ralph Jacobson, Global Retail Industry Analytics Marketing Executive, IBM

Customer experience is directly tied to loyalty and there is no such thing as a "Loyalty Program." Customers own their loyalty and will always own it and no such "Program" will change the fact that experience is the key factor to customer loyalty.

Loyalty is determined by the customer when they select a retailer consistently when they have many other choices. Employee loyalty is much the same. Employees become loyal based on their experience above all other factors. Study after study always show that employee pay is NOT the top factor. In most cases, employees leave managers, not companies. Thus it is not surprising that the survey shows at this point over 60% selecting management practices.

Management practices control all other factors, no matter what the "policies" are towards employees.


We should remember that this isn't just about the customer-facing employes on the shop floor. The behaviors of all employees will have an impact on customer loyalty. This is true for e-commerce retailers too!

Matthew Keylock, Senior Vice President, New Business Development and Partnerships, dunnhumbyUSA

In my experience, employee engagement has a direct and powerful effect on customer loyalty - both positive and negative effects. However, this is manifested differently across the generations.

Disengagement in the older generations is often driven by a feeling of being ignored, forgotten, taken advantage of, taken for granted, etc. For younger generations, I think the turn-off is a mis-match with the culture of the workplace.

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Dan Raftery, President, Raftery Resource Network Inc.

Absolutely there is. The frontline staff who are not just facing the customer and providing the friendly and personal service experience, but makes sure that the environment is in decent condition and - assures the most important - there is a product to be purchased (instead of empty shelf).

One of our customers said that eventually all the state-of-the-art supply chain technologies and fancy loyalty programs are worthless if the last link of the supply and service chain - the store - fails. The same person named 1.) Store manager, and 2.) Location as the key success factors of their company.

Our work partly got started because this guy understood that he cannot change the location of their stores, but there was yet lot to do in their company in terms of providing the local management better tools to motivate their staff better with positive experiences via improved team spirit and moments of success - and to take more responsibility in implementing the given processes and practices in daily operations.

Ville Levaniemi, Co-Founder, HappyOrNot Ltd

Employee engagement plays a big part in the customer experience, and we know the experience has a huge impact on loyalty and visit intent.

I think one of the biggest drivers of that engagement is the expectations of the frontline managers. Companies need to teach these managers how to create a great work environment, and how to coach and develop part-time and full-time employees.

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Doug Fleener, President and Managing Partner, Sixth Star Consulting

Happy and engaged management lead to happy and engaged employees which leads to happy and engaged customers, which leads to profits.

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Carlos Arámbula, Strategist, One Ninth & Co-founder of MarcasUSA, One Ninth, MarcasUSA LLC

I would say that 75-99% of employee engagement is tied to customer loyalty. As Shep Hyken says, "treat your employees the way you want them to treat your customers."

If you are doing a lousy job you will get lousy employee engagement.

With that said one of the biggest causes for employee disengagement is the fact they are not getting their psychological and emotional needs met in the work environment.

If an employer can answer these four questions employees instinctively have for their management team, it will go a long ways towards creating employee engagement.
Questions Employees Want Answers to:
1. Do you like me?
2. Do you care about me?
3. Can I trust you?
4. Do you know what you are doing? (Are you competent?)

Tom Borg, Business Expert, Tom Borg Consulting, LLC

The logical link between customer loyalty and employee engagement was well documented in Fred Reichheld's book, "The Loyalty Effect." I find that open book principles such as clear goals, understanding of company economics and transparency can enhance employee engagement. A recent Harvard Business Review article is a good starting point.  More information can be found at www.openbookcoaching.com.

Bill Fotsch, Founder, Open Book Coaching

There was an interesting study done by TCS which found a correlation between employee engagement and customer satisfaction score. For every 1% increase in employee engagement translated into 3% increase in customer satisfaction score. "Happy employees" lead to "happy customers." Customer centricity starts with your employees.

AmolRatna Srivastav, VP, Accenture

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