International School of Management
The Employee – Customer Relationship
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- The Customer – Employee Relationship at Pike Place Fish Market
- Make Their Day
- Choose Your Attitude
- Transforming Customer Satisfaction Into Customer Loyalty
- Figure 12: Customer Perceived Value
- Figure 13: Customer Loyalty Pyramid Source: ODI
The Employee – Customer Relationship There have been numerous empirical studies that have shown a strong positive relationship between employees and customer satisfaction (e.g., Band, 1988; George, 1990; Reynierse & Harker 1992, et.). Some investigations have provided explicit measures of this relationship. For example, a study at Sears Roebuck & Co. showed that a five-point improvement in employee attitudes led to a 1.3 rise in customer satisfaction, which in turn, generated a .5 percent increase in revenues (Bulgarella 2005). In other studies, results have shown that upwards of 80 percent of customer satisfaction can be attributed to the relationship between the employee and the customer. These results indicate the importance of the employee to engendering a feeling of satisfaction in the customer. This section considers the elements involved between the employee and the customer that help to cultivate customer service and lead to customer loyalty. Although it may seem to be an intuitive concept, it deserves mention that before an employee can affect the satisfaction of a customer, the employee must be satisfied. The elements of employee satisfaction have been discussed earlier in this paper. This is an important consideration, as satisfied employees can make satisfied customers, which in turn can positively affect the profitability of an organization. The strength of a customer’s relationship with the salesperson affects repeat business, recommendations, and the probability of paying a premium price for products and services. Not all employee-customer relationships are the same, and trust is critical in building those that endure. Salespeople are also important in reducing customer desertion to competitors. Customers that experience high quality customer-employee encounters maintain a positive assessment of a relationship with an organization (Johnson 2006). This makes the relationship between employees and customers all that more important to organizations seeking to create customer loyalty and translate customer loyalty into added corporate profitability. Many initial customer interfaces today have been automated. For a while, the automation of customer service and support functions was seen as a legitimate way to improve customer satisfaction. Many organizations invested heavily in service automation at the expense of the human element. Customer satisfaction and loyalty invariably are earned by delivering excellent customer service, and the human touch is often the key differentiator. “Additionally, customers with higher lifetime value have learned to expect more. “Gold customers often bypass automation and directly deal with support staff to get their problems resolved” (Uckun and Matan 2007). Ultimately, the customers’ relations with an organization comes down to their relationship with the employees of the organization. A problem or need that is addressed quickly, efficiently, and with care and concern for the customer can lead to strong customer loyalty (Borland 2006). Customer – server relationships can be so powerful that in some cases, the customer may choose to leave an organization if the employee leaves. Customer – server relationships may be valued so highly that customers may be willing to follow servers, even if they change employers. This can be found in businesses that require a high level of personal service. Thus, patients follow doctors from one hospital affiliation to another. And investors follow brokers from one brokerage firm to another (Heskett, Sasser and Schlesinger 1997). These examples serve to highlight the magnitude of the influence the customer – employee relationship can have on an organization. If an organization has an employee or employees that are involved in many relationships like this, it is easy to begin to understand the potential financial impact it may have on the organization. It has been found that customers with good customer – employee relationships will continue to do business with an organization that may provide an inferior product versus the competition, if a good relationship exists with an employee. When interviews were conducted with customers to find out why they were especially loyal to local repair garages, an interesting contradiction was found. On the one hand, people believed that mechanics at chain outlets and auto dealers had better and more sophisticated training. On the other, they put more faith in the local mechanic’s judgment and believed he’d give them better service. “In a word, people simply felt more comfortable doing repeat business with the same individual, regardless of technical finesse” (Reichheld 1996). To add to this finding, it has also been discovered that employee loyalty adds to new customer acquisition as well as retention. Research has also shown time and time again that satisfied customers are the number one source of new customer referrals. Once again, the employee – customer relationship proves to have an affect on customer retention/loyalty, and corporate profitability. Many cynics contend that it may not be rational to correlate employee satisfaction with customer satisfaction. Real corporations, they argue, need profits and return-on-capital, not just happy employees and satisfied customers. It is possible for an organization to have highly paid loyal employees, as well as satisfied customers that enjoy low prices and a high degree of service delivery (Kaplan and Norton 1996). The statistics however, prove the cynics incorrect. A recent survey of 55,000 employees matched employees’ positive attitudes toward customers, and a correlation to higher profits. It is important for employees to feel that they are fairly compensated, but beyond that, they want to feel like they are an important part of the organization and are valued by their leadership. In addition, employees derive satisfaction from knowing that they bring value to customer relationships that translate into growth and profitability for the organization (Greenberg 2006). Customer satisfaction really comes down to the level of employee satisfaction being experienced by the organizations employees. An organization must understand the factors that facilitate the development of the core values and key motivators of their employees. A system should be put in place to constantly identify the level of employee commitment to customer focus. The system can then be extended to create a statistical model that represents the linkages between employee attitudes, feelings and behaviors that are important outcomes such as customer satisfaction, customer loyalty and even organizational profitability. Research indicates that an organization’s internal service orientation and customer service climate have a significant impact on the satisfaction and loyalty of the customer (BAI 2005). The Customer – Employee Relationship at Pike Place Fish Market Pike Place Fish market was a humble, quiet and unassuming little fish market located on the Seattle, Washington waterfront in 1965 when it was purchased by one of its employees, John Yokoyama. For the next twenty years John ran the fish market with a modicum of success. In 1985, in an effort to expand the operation, John started a wholesale fish operation. In the spring of 1986, Pike Place Fish Company in Seattle’s Public Market was on the verge of bankruptcy. The seafood market where he had once been an employee but was now the owner, was more than $300,000 in debt and sinking deeper fast (Fine 2000). About that time, an old friend, Karen Bergquist, introduced him to her husband, Jim Bergquist, who happened to be owner of bizFutures – a company that offered business coaching. Mr. Bergquist proposed that he use his service to get John’s business back on track and beyond that, to create an extraordinary future. John accepted and the rest is history (Bergquist 2005). The first step for Pike Place Fish was to decide who they wanted to be. In the words of John Yokoyama: “In one of our early meetings with Jim, we began an inquiry into who do we want to be? We wanted to create a new future for ourselves. One of the young kids working for me said, “hey! Let’s be World Famous!” I initially though that was a stupid thing to say.” The more they talked about it, the more the entire team became excited about being World Famous (Pike Place 2006). As a result of this meeting, John added ‘World Famous” to the logo and had it printed on all of the company materials. The next step for the team at Pike’s was to figure out how to translate the term “World Famous” into something tangible that would improve their business and set them apart from the competition. It did not take long for the company to realize that for them, being considered “World Famous” meant being present for their customers. They believed that “being present” exceeded providing just outstanding customer service, it meant being there and relating to the customer as a human being. They take all of the attention off of themselves to be only with the customer, and they actively look for ways to serve them. With each customer, they seek a new way to make their day. They have made a commitment to have their customers leave with the experience of having been served. The customer experiences being known and appreciated whether they buy fish or not. They’ve discovered what it really means to make a difference for the people they serve. They’ve also learned what it takes to break records and to go beyond what everyone thought was possible (Bergquist 2005). What John and his employees ended up creating was an entirely new customer service philosophy commonly known as “FISH!” The philosophy is centered on the following four guiding principles: Play – Work made fun gets done, especially when we choose to do serious tasks in a lighthearted, spontaneous way. Play is not just an activity; it’s a state of mind that brings new energy to the tasks at hand and sparks creative solutions. Make Their Day – When you “make someone’s day” (or moment) through a small kindness or unforgettable engagement, you can turn even routine encounters into special memories. Be There – The glue in our humanity is in being fully present for one another. Being there also is a great way to practice wholeheartedness and fight burnout, for it is those halfhearted tasks you perform while juggling other things that wear you out. Choose Your Attitude – When you look for the worst you will find it everywhere. When you learn you have the power to choose your response to what life brings, you can look for the best and find opportunities you never imagined possible. If you find yourself with a negative attitude, you have the power to change it (Fine 2000). By instituting and living these four principles, the employees at Pike Place Fish market have been able to deliver an unmatched customer service experience that has become renowned world-wide. Pike Place Fish market is a workplace where everyone chooses to bring energy, passion and a positive attitude with him or her each day. It is an environment in which people are truly connected to their work, to their colleagues, and to their customers. People from all over the world now come to Pike’s to see the employees throwing fish and engaging customers (Bergquist 2005). The employees at Pike Place are the example of what employees can do to effectuate the ideal customer – employee relationship. The flying fish, shouts, chants, teasing of customers, and antics are entertaining. But one soon comes to realize that they have walked onto a stage and have become a member of the cast. The fish guys are sizing you up and just waiting for the opportunity to throw you a line. “They are committed to recreating their vision of the market each day. But that can only happen if they find a way to make a memory for you so that when you leave, whether carrying a fish or not, you leave with something you will want to share with others” (Lundin et al. 2000). The customer – employee relationship that exists at Pike Place is so successful that it has spawned a consulting business that helps organizations recreate the success of Pike Place at their own companies. The FISH! Philosophy has also led to a series of customer service and employee involvement videos, as well as several books about the concept. For the past several years, through the films and the books, The FISH! Philosophy has spread into organizations around the world. “People are reinventing what their time at work can be about, and the passion, energy, and accountability they are discovering that lead to surprising business improvements” (Lundin et al. 2000). John Yokoyama and his employees have tapped into something special that has led to the overwhelming financial success of their organization. That something is how to serve the customer uniquely, personally, and leaving them feeling appreciated. These are traits that many have copied in order to bring that success to their organizations. Transforming Customer Satisfaction Into Customer Loyalty Recent studies provide empirical evidence of something we already know intuitively: customer loyalty is a key driver of profitability. Creating customer loyalty must be an integral part of an organization’s strategy, particularly in a time of industry consolidation. The ability to accurately assess and understand the customers’ requirements and expectations is fundamental to business success. Furthermore, the ability to comprehend customer loyalty drivers should be the foundation for an organization’s strategy development (Teegarden and Krok 2006). A common mistake that many organizations make is assuming that satisfied customers are loyal customers. This section of the paper will analyze the elements of a “loyal” customer and examine the benefits of loyal customers to an organization. Although customer satisfaction is a key element in determining customer loyalty, the two are by no means synonymous with each other. The first thing necessary in order to accurately analyze the benefits of customer loyalty is to define the term. The first problem is that it’s not that easy to do. The term “customer loyalty” actually has many definitions, ranging from volume purchase rewards programs to emotional bonds between customer and supplier. “Some say customer loyalty is the same as customer retention when measured from the seller’s point of view” (Swaddling and Miller 2002). Research by The Gallup Organization has shown that there is an essential ingredient in the customer relationship; an ingredient that companies typically overlook when they assess the strength of their customer relationships. This critical component is the emotional attachment felt by the customer. The emotional attachment possessed by loyal customers can be translated into an organization’s profit performance (McEwen 2001). Several researchers have even offered hypotheses that suggest customer loyalty can be calculated by applying a mathematical equation. This method applies to the entire customer base, rather than with one particular customer, which may be valuable information if used correctly by an organization. These researchers suggest that the simplest way to approximate average customer tenure is by calculating the overall defection rate and inverting the fraction. This is easily done. First, count the number of customers that defect over a period of several months, then annualize this figure and express it as a fraction of the customer base you began with. “If you lose 50 out of 1,000 customers over a three-month period, this equals 200 customers per year, or one-fifth of the customer base. The second step is to invert the fraction. In this case it would result in 5 over 1, meaning that the average customer stays with the organization for five years” (Reichheld 1996). Organizations can use this information to understand the rate at which they are losing customers, and hopefully be able to take actions that will lower the number of defecting customers. A satisfied customer is a good customer, but may not be loyal at all. A satisfied customer may feel that their needs were met, the product was satisfactory, and the service was alright. A satisfied customer may not have been ecstatic with their experience with you, and may choose to go to a competitor next time, despite their satisfactory experience with your organization. What is a loyal customer? One who feels great about dealing with your organization. Their needs have been met and/or exceeded, they thought the delivery was great, the service was great, and the experience was great. These customers have been so satisfied with their experience that they will tell others. They will retain feelings of satisfaction and remember their experience (Gitomer 1998). A loyal customer experiences a positive emotional event that they want to share with others, and have a desire to experience over and over again. In order to dazzle customers and turn them into loyal customers, an organization must tap into the customers’ needs, which is not an easy task. Customers are more informed and more demanding than ever before. They tend to ask more in depth questions, they research prospective purchase in greater detail, and they look for organizations that will provide high levels of satisfaction and quality (Kindinger 2005). An analysis of loyal customers will yield the result that they all have a level of “customer perceived value” with the organization that they are loyal to. Customer perceived value (CPV) is defined as “the prospective customer’s evaluation of all the benefits and all the costs of an offering as compared to that customer’s perceived alternatives” (Swaddling and Miller 2001). Figure 12: Customer Perceived Value 
Source: National Taiwan University of Science & Technology As the graph above depicts (Fig. 12), CPV measurement differs from customer satisfaction in each of the characteristics. The sample includes both customers and prospective customers. Asking only current customers of the organization about their experiences usually will produce biased results because those customers can be predetermined to be favorably inclined on the part of the organization (Swaddling and Miller 2002). This analysis indicates a strong need to also assess the desires of potential customers in order to adequately assess the organizational factors that may lead to customer loyalty. Many organizations tout high resulting customer satisfaction surveys, while at the same time experiencing equally high customer defection rates. Organizations need to realize that satisfaction is no longer an accurate measure of customer loyalty. Customer satisfaction can be delivered in a single contact with the organization, whereas, customer loyalty evolves over time and is based on many emotional elements that stem from different experiences with an organization. Even if organizations feel that they have loyal customers, it is important to understand why the customer is perceived to be loyal. Is it price, brand, convenience, service, or a mix of all of these elements? If it is just one of these elements, and the customer lacks an emotional connection to the organization, there probably is no real loyalty that exists in the relationship. If the customer is loyal because of low price, for example, the second a competitor offers a lower price, the customer defects and becomes loyal to the new low price. This points to the fact that there is more to loyalty than just money. Money is typically used initially to pique the interest of a customer, but the extent to which it will work depends on their satisfaction level with their current organization (Gitomer 1998). Because of this, an organization should be focused on the whole relationship with a customer from every perspective, not just concentrated on one element. American companies have become very proficient at monitoring and measuring customer satisfaction. Companies know they need to pay attention to their customers. They know the financial benefits that come from keeping their customers happy. And they’ve done their best to put “satisfaction” programs in place. “Yet monitoring of various U.S. industries reveals that relatively few companies (17%) have improved their customer satisfaction index measures after six years. Fewer still, only one in twenty, show any consistent improvement on these scores” (McEwen 2005). This is not to say that measuring customer satisfaction is not a worthwhile initiative by organizations, but that the information must then be used to determine how specific elements of satisfaction can be translated into loyalty. Customer loyalty relates to probable behaviors. To measure customer loyalty, an organization must develop specific dimensions of customer loyalty to determine the description and intensity of customer loyalty in aggregate and within each core segment of key customers served. It is essential to have a solid grasp of which factors in your business relationship with your customers are most important to them (Teegarden and Krok 2006). Providing customer satisfaction is typically associated with front-line employees that come into direct contact with the customer. However, in order to create customer loyalty, every part of the organization needs to be engaged in the act of serving the needs and desires of the customer. By meeting basic requirements, employees of the organization can prevent customer complaints and dissatisfaction. By reaching beyond basic requirements to anticipate and satisfy the customers’ unstated needs, they also develop customer confidence. “To earn customer loyalty, however, all parts of the organization (not just those which interact directly with external customers) must work together to provide the uncommon, unexpected dimensions of quality and service that delight, rather than merely satisfy your organization’s customers” (ODI 2006) (Fig. 13). Now that it has been made clearer exactly what a “loyal” customer is, the paper will consider the benefits to an organization of having loyal customers. Figure 13: Customer Loyalty Pyramid 
Source: ODI For many years managers have believed that the key driver of profitability is share of market. However, Earl Sasser, working with former student and Bain Company Principal, Fred Reichheld, found this not to be true. Based on the collection of factual experiences of a number of organizations, they identified a factor more often associated with high profits and rapid growth – customer loyalty (Heskett, Sasser and Schlesinger 1997). Therefore, it is essential that organizations be able to identify loyal customers in order to ascertain their contribution to profitability, and ultimately, their value to the organization in terms of revenue. Whereas satisfied customers may contribute to organizational profitability, this cannot be relied on and is most likely not constant or stable. At the same time, the income stream from a loyal customer is constant and can be relied on to continue to contribute to organizational profitability. Calculations can be made to assess the value of each customer, especially today, with access to more sophisticated customer tracking systems. Once you have an accurate picture of the true value of a customer, you’re in a position to calculate what it would be worth to increase your customer retention rate – which is the only realistic way of evaluating investments in customer acquisition and customer loyalty. “Retention economics lets companies make rational, dollars-and-cents decisions about the value of increased customer loyalty and tells them accurately, which loyalty-enhancing investments will meet their rates of return” (Reichheld 1996). It is important for organizations to understand that not all customers are profitable. Being able to calculate the profitability of a customer keeps a customer-focused organization from becoming customer obsessed. The customer profitability measure may reveal that certain targeted customers are unprofitable. Because initial customer acquisition is expensive, newer customers will usually prove to be unprofitable because they have not yet had the opportunity to build a buying relationship with the organization. This makes the calculation of lifetime profitability important as the basis for retaining or discouraging currently unprofitable customers (Kaplan and Norton 1996). We are now poised to enter a new era of loyalty management in which winning companies will move beyond measuring customer satisfaction and defection only to approaches based on a broader understanding of customer migration and attitudes. Organizations can capture this significant loyalty opportunity and influence migration and churn by as much as 20 to 30 percent by addressing three key opportunities: manage customer migration, not defection, integrate attitudes, needs, and satisfaction to understand drivers of migration, and tailor investments and loyalty approaches to the most critical parts of the opportunity (Gokey and Coyles 2001). This is being made easier through the access of Customer Relationship Management (CRM) programs, which will be discussed in greater depth later in this paper. The key for organizations is to identify satisfied customers that they can, in turn, make loyal customers in order to add to ongoing organizational profitability. Directory: uploads uploads -> 587 Return function, r i(X) r i(0) r i(1) r i(2) r i(3) 1 0 2 4 6 Thermal Station, I 2 0 1 5 6 3 0 3 5 6 10 uploads -> Department of science and humanities department of mathematics part-a questions and answers uploads -> The Case Against the nypd’s Quota-Driven ‘Broken Windows’ Policing What Is It? uploads -> For want of a nail uploads -> Ownership Models There are two different types of ownership models uploads -> Police Militarization uploads -> City of rising star regular meting thursday, july 14, 2016 uploads -> Township of winfield uploads -> Stop Militarizing Law Enforcement Act of 2014 uploads -> The Black Panther Party’s Ten-Point Program What We Want Now! Download 1.01 Mb. Share with your friends:
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