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For Loyal Customers, Look to Your Employees

February 3, 2014

For better sales and long-term loyalty, a company should treat its employees as it would want them to treat its own customers.

This much is evident in a new study by online software provider Cvent, which finds that customer retention rates are 18% higher on average when employees are highly engaged. It's a figure many of the best operating brands have known for a while, and some of the savviest, including eBay, IKEA and Zappos.com, have found ways to boost employee engagement to increase customer loyalty. Other brands take note.

Companies with loyalty programs have a particular edge in improving employee commitment, because they already have the insights into what their customers prefer, said Bryan Pearson, COLLOQUY contributing editor and president and CEO of LoyaltyOne.

The “Employee Engagement: Revenue Growth Strategy for 2014” report also found that increased employee engagement can positively affect return on investment. Thirty-three percent of companies surveyed reported a significant improvement to profit margins when customers were highly engaged. The online study polled 376 people from both business-to-business and business-to-consumer companies.

“It's no secret that there is a direct correlation between a happy worker and a happy customer. A company cannot change customer behavior if it is not engaging its employees,” Pearson said.

Simple and significant employee engagement tactics

So how can companies create truly engaged – not to mention happy – employees to increase customer loyalty and ideally profit?

“Make sure that what you're doing external for the customer is also what you're doing internal for the employee,” said David Zinger, a former psychology professor at the University of Manitoba and founder of the Employee Engagement Network.

He recommends that companies do something small, yet significant to boost employee engagement.

“If the significant thing is retention, then what is the absolute smallest thing that can be done to have the biggest impact on customer retention and loyalty?” Zinger said.

For example, he suggests writing a single action on the back of a business card and tucking it away as a reminder of how to boost engagement (and retention) in a little way. The idea, Zinger says, is really a rip-off of a book by Mike Morrison, “The Other Side of the Card.”

“Ask your employees what they can do in three minutes to increase loyalty. People are capable of some pretty incredible things,” he said.

The size of the business card makes it more digestible for workers. Employees are more likely to be receptive to a single task than a 12-point plan – they have too much going on for anything else to be realistic, Zinger said.

Following are examples of what some of the world's leading brands are doing:

How IKEA, eBay and Zappos build happy workers

IKEA: IKEA has been selling unassembled furniture since 1943, but the company only recently assembled an employee loyalty program. The affordable home furnishings merchant recently launched the program called “Tack!” – Swedish for “thank you” – which rewards employees of more than five years with retirement fund contributions. The amount each employee receives depends upon the entire company's performance, thus providing an incentive to work for the good of all.

eBay: Companies do not need to have a loyalty program to build loyalty with their employees, however. EBay Germany, for instance, encourages employees to sell their own items via eBay on company time. It uses gamification to engage employees through contests, challenging them to sell the most items, Zinger said.

Zappos.com: It's hard to talk about employee loyalty without mentioning Zappos. The online shoe and clothing shop provides free lunch, including drinks, sandwiches, soups and salads, and snacks for its workers. Zappos also employs a full-time life coach available to speak with employees about business and personal issues. Its headquarters even includes a nap center where staff members can grab a few extra winks if they find themselves dragging.

Though it certainly helps, a company doesn't need to have a designated nap room to build employee loyalty, Pearson said.

“The best way to foster loyalty among employees is to empower them to make decisions that improve the customer experience,” he said. “Provide them with the information and customer data that will help them make better-informed decisions in real time.”

Zinger echoed Pearson's sentiment.

“Trust that your employees can figure out what to do,” he said.

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