Loyal employees create loyal customers

My partner, who is a fairly typical woman, has been going to the same hairdressing salon for over 10 years. When making an appointment, she always asks to see the same hairdresser that she has used all of that time. I'm sure this sounds very familiar to most women (and a lot men) who are reading this article!

But what if a new salon opened nearby and my partner's favourite hairdresser decided to work there instead? Well, I’m pretty sure that she would also switch allegiance to the new salon.

This illustrates a really important point about customer loyalty. A company might have a high degree of customer retention, but the actual loyalty is often to a particular member of staff, rather than to the company itself. 

There are numerous other examples of where customers are more likely to feel a sense of loyalty to a particular employee, rather than to the company that they happen to work for. It's especially common where there is a creative element involved (such as graphic designers) or where confidential information is shared (such as accountants, solicitors, and financial advisers). 

The strange thing is that many business owners understand the importance of customer loyalty, but surprisingly they forget that the long-term loyalty of their employees can also have a knock-on effect on customer retention.

This principle can be a great source of competitive advantage for smaller companies that can hold onto their best employees. In his book ‘The Loyalty Effect’ (1996) the business strategist Frederick Reichheld discusses research into the car servicing industry.

Reichheld discovered that the highest rate of customer loyalty was found in small independent garages because they had the highest rate of employee retention. Although most customers believed that mechanics at the big national car servicing chains possessed better training and equipment, the customers still preferred to deal with the smaller independent garages, which employed mechanics who they had got to know.

Reicheld claims that: “Customer loyalty hinges on committed teams of high-calibre employees - the kind who exceed the customers' expectations, rather than just grudgingly meeting them.” In fact Reichheld goes further than this by suggesting that loyal employees can also be a good source of new customer referrals. So, not only do loyal employees help you to retain your existing customers, they can also help you to gain new ones.

Retaining your best employees should be right at the top of your customer service strategy. Loyal employees create loyal customers.

Reichheld, F, 1996, The Loyalty Effect, Boston: Harvard Business School Press