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Your Guide to Internal Communications and Employee Engagement
How Employee Engagement Raises Customer Satisfaction
How Employee Engagement Raises Customer Satisfaction

Since a study by Bain & Company in 19901 showed that "across the range of industries, increasing customer retention by as little as 5% could result in long-run profit increases between 25% and 95%", managements are trying to focus on how to tackle customer loyalty on different bases, to ensure that the customers stay with them. A more recent approach to this matter – opposed to the marketing strategies – is the focus on internal processes and employee engagement.

Why Employee Engagement?

Employees are ultimately the ones interacting with the customers and providing their services, hence making them also one of the main reasons for customers to return to your company's services repeatedly. Best selling author and Forbes columnist Kevin Kruse defines Employee Engagement as “the emotional commitment an employee has to the organization and its goals. This emotional commitment means engaged employees actually care about their work and their company. They don’t work just for a paycheck, or just for the next promotion, but work on behalf of the organization’s goals.”2 which means, the engaged employee will go out of his way to serve his customers well and do his job thoroughly.

So what’s the logic behind having engaged employees who build up good service relationships to the customers? If we compare studies, we find that most customers only become profitable with time3  but they will spend more and more money with your company each year to come, as it is shown strikingly in an article by the Harvard business review on the examples of the auto servicing industry and the industrial laundry industry, where after the third year, the average customer has doubled the profit he generates for the company.1

Costs of Losing Employees and Customers

Trying to trace the numbers we'll see: According to Fred Reichelt's "The Loyalty Effect" losing one in 20 customers might leave you short 30% of profits over time.4 Now bear in mind that the top reason for customers to leave one's services is dissatisfaction with the service provider (70%), so it is crucial to keep the good employees you have. Here we face also a numbers game: As the Center for American Progress found  that the cost of having to replace an employee is between 16 and 22 percent of their annual salary, and in cases in which the employee is highly educated and specialized in a matter, it can be up to 213% of his salary.5 If we add up these costs, since the loss of a good employee can mean the loss of good customers, it only makes sense to invest in employee engagement to higher the customer loyalty and with that increase the service standards.

And the great thing about employee engagement here is, that it does not only help to improve the individual employee's productivity, it will also increase the entire group's service quality, since they can learn from each other.

Success Story: Teddy the Concierge

In a recently published newsletter for partners and management, hotel conglomerate FRHI (the union of the three luxury hotel brand Fairmont, Raffles and Swissôtel) praised the success of their new employee engagement solution, based on online communication, which allows employees of the chain's three brands to exchange their experiences and know-how through an online platform. In this particular case they showed the example of Concierge Teddy, who had his 30 year anniversary with the Fairmont Winnipeg and was celebrating with regular guest Matthew, who had been the hotels guest as a kid, and has ever since been returning to the hotel for the past 30 years, mainly because of his great relationship with Teddy. FRHI went on reporting, that following this post many colleagues congratulated Teddy and requested tips from him, on how they can build up stronger relations to their customers. This helped the team overall to raise their service standards. And the FRHI employee engagement solution produces more example like this. A phenomenon occurring all over the place where employee engagement is in the focus, as a study by TNS Employee Insights backs up "When co-workers trust each other and rely upon each other to accomplish tasks more efficiently, they are more likely to be engaged at work and less likely to leave."6

Also if you have your employees building up relationships with the customers, you can ask the customers easily for feedback, which is more effective than relying on customer feedback cards or online surveys according to Patrick M. Wheeler, Managing Director at Managing Contract Services "Information gathered from a customer at or immediately after an event is 40 % more accurate than info gathered 24 hours later. Response rates increase 10% to 12% simply by requesting feedback while the event is happening.” 7

In conclusion we see, everything is interconnected. Dealing with people, communication is in the core of each interaction. Happy and engaged employees lead to happy and engaged colleagues, and a happy and engaged team, leads to satisfied customers who then again will engage more with your company, hence not only increasing your profit, but also help you improve your services along the way.

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References:

1 http://hbr.org/1990/09/zero-defections-quality-comes-to-services/ar/1
2 http://www.forbes.com/sites/kevinkruse/2012/06/22/employee-engagement-what-and-why/
3 http://www.refresher.com/ajabrealcosts.html
4 http://www.bus.iastate.edu/kpalan/mkt504/reichheldetalautumn.pdf
5 http://cdn.americanprogress.org/wp-content/uploads/2012/11/CostofTurnover.pdf
6 http://qualtrics.com/wp-content/uploads/2014/06/TNS_2703-14_ManagerTipsBook_EMAIL.pdf
7 http://www.synergy-usa.com/eNews/2011-02/LostCustomersCosts.pdf