Employees Are More Important Than Customers Essay Example

and ultimately result in increased profitability. European organisations are conceptualising the critical importance of employees and recognise that loyal, efficient employees have “an incredible and tangible impact on profitability” (Higgison. 2006). Former Scandinavian Airlines System CEO Jan Carlzon describes front-line employees as one of the most critical elements of a service experience.Not only did Carlzon explain that these boundary spanners impact customer satisfaction and retention, but also stressed the importance of employees towards company profits (Emery, Barker. 2007). While frontline employees directly affect the financial performance of a company, a study by Northwestern University in the United States affirms that employees that do not have direct contact with customers still contribute to a firm’s profitability (Terzo. 2005). Employees contribute to a wide range of service experience elements; including word of mouth, quality, satisfaction, loyalty, and critical incidents and moment of truth.Through the fulfilment of these areas, company’s can perform at reduced costs and display increased interaction both internally and with customers. This efficient disposition develops strong relational bonds and creates opportunities to cross-sell (Berry, 1995).

It is therefore evident that the role employees play in any successful service encounter positively contributes to a company’s ability to generate a profit, reaffirming the notion that employees are more important than customers. Employees influence on customers Employees have a hugely significant influence on customers and will ultimately determine the scope of business operations. They provide crucial contributions both directly and indirectly through word-of-mouth, service quality, customer loyalty and critical incidents, which, when effective, generate organisational profits (Yingzi, X. , van der Heijden, B. , 2005). Word of Mouth Word-of-Mouth communication between existing customers and potential customers can be significantly

influenced by service employees (Hennig-Thurau et al., 2002). According to Anderson (1998) positive word-of-mouth communication can be defined as “all informal communications between customers and others concerning evaluations of goods or services” (p. 6).According to research conducted by Heskett et al. (1997) it was proved that word-of –mouth is more influential in attracting new customers in the service based industry, because consumers perceive Word-of-Mouth communication as a more reliable source of information. It is this widely held perception that results in WOM having a far stronger ability to influence consumers than any marketing campaign (Herr et al. 1991). Hennig-Thurau et al. (2002) linked the level of satisfaction with the likelihood of customers engaging in positive word-of-mouth. It is therefore vital that employees satisfy consumer expectations and ideally exceed them.It has been proven (Herr et al. 1991) that WOM is important in attracting new customers, and that the employees of a service organistation do in fact determine the level of satisfaction and ultimately positive WOM (Hennig-Thurau et al. 2002 and Heskett et al. 1997). It is this proven relationship that gives weight to the concept that ‘employees are more important than customers’.

Service Quality

Service quality is a major keystone for companies, especially in the services sector. An employee provides an organisation ‘added value’ to their brand through smooth service delivery in meeting and exceeding customer expectations (King, Grace. 008). The quality of service provision becomes the basis of the customer’s relationship with a company, hence, a vital function for employees. Driggs (2008) recognises the importance of service quality in the ‘race for customers’ because essentially, the quality of a service is often the only differentiating factor between

companies in the eyes of consumer. This quality can then be rendered into increased customer loyalty, organisational growth, profitability, and shareholder value.

The impact of service quality is a direct driver of customer satisfaction; a goal that all organisations strive for.Scholars and academics have confirmed that superior service provision will result in customer satisfaction, thus positively affecting future behavioural intentions (Qin, Prybutok. 2008). This train of thought exhibits the overarching importance of employees in organisations. Customer Loyalty The consumer experience in a service encounter is absolutely critical to the prolonged success of an organisation. Driggs (2008) explains that through the delivery of a superior service, a company can create a sustainable competitive advantage, and as a result, establish the roots of customer loyalty.

Such loyalty is the direct outcome of personal interactions between employees and customers (Hennig-Thurau et al. 2002). Many service providers are continually assessing their ability to create customer loyalty, as Berry (1995) explores the direct relationship between loyalty and profitability through cost reduction and increased revenue per customer. It is the belief of many that customer satisfaction is the key driver of loyalty and other customer influences.Employee action is the dominant source of this satisfaction and subsequent loyalty, reaffirming the notion that employees are more important than customers (Faullant, Matzler, Fuller.2008).

Moments of Truth and Critical Incidents

Moments of Truth and Critical Incidents play a crucial role in customer satisfaction, attitude towards the service provider, and future intentions (MacStravic 2004). Because employees have a significant influence on satisfaction, attitudes toward service providers, future intentions and repeat purchases (Petrick et al. 006), it is vital that providers identify and manage incidents to result in customer satisfaction and

loyalty (MacStravic, 2004). Customer loyalty drives profitability, making complaint handling a critical "moment of truth" in maintaining and developing the customer relationships (Berry and Parasuraman 1991).

Once again as suggested be MacStravic (2004), it is important that management understands the importance of these incidents and deals with them appropriately to maintain the customer relationship.Reduced Turnover and Employee Retention Further supporting the notion that employees are more important than customers is the association between employees and reductions in company turnover as well as the benefits correlated with employee retention. Employee turnover is a growing issue for companies in any industry; referring to the unplanned loss of employees that an organisation would prefer to retain (Frank et al. 2004).

This is obviously a pressing concern as turnover involves an enormous amount of associated costs.In the United States alone, turnover costs the national economy an estimated $5 billion annually (Journal of Business Strategy; 2003). The fallout from employee turnover also extends into reduced earnings and stock prices; decreasing by an average of 38% in US businesses (Sibson, 2000). Reichheld and Teal (1996) believe that the retention of good employees is equally as important as customer retention. Furthermore, CEO’s of some of America’s largest companies cite employee retention as the most critical factor in planning future business directions (PWC; 2004).

Employee retention is defined as the effort by employers to retain desirable workers in order to continually meet and exceed business objectives (Frank et al. 2004). The growing concern of turnover and its severe ramifications has prompted many businesses to invest considerable resources into improving internal business through engaging and motivating employees in order to retain these valuable assets (Lings, 2000). Customers

are more important than employees The importance of customers is much more significant than that of employees and extends further than merely providing service providers with profits.The notion that customers are more important than employees is highly feasible and supported. Moreover, customers have a widespread influence in spreading positive and negative word-of-mouth and also have a significant role in providing essential information for business success, but are ultimately the core purpose of business today.

No business can exist without customers According to Sam Walton, Chief Executive of Wal-Mart, no business can exist without its customers, the company lives by the philosophy of making the customer the focus of all business efforts.This essential “pivot-point” (Lusch and Laczniak, 1987) position of the customer suggests that the best interests of all participants, internal and external, in the exchange process will be served when all efforts are focused on serving customer’s needs and wants. This, therefore, highlights the importance of customer existence for business. Business growth usually demands increasing numbers of customers, therefore in order for a business to grow and remain profitable a focus on customers is crucial. (Clutterbuck, D. Goldsmith, W.998) This focus on customers is driving companies to extraordinary lengths. Since Sony introduced its first Walkman portable stereo system in 1979, they have introduced 227 different models. This works out, on average, at a new model every three weeks. (Anonymous; 1994) Service companies must now aim for higher degrees of satisfaction and loyalty in their customers, and to do this they must focus directly on the customer’s wants and needs.

Companies need to understand their customers to deliver services and products which meet and exceed those requirements now

and into the future, so that they can reate competitive advantages for growth and take advantage of the opportunities presented to them, (McGaryy, 2006) highlighting the notion that customers are essential for the existence of business today. Statistical results indicate that there is a financial reward to those companies that focus on the consumer and a financial penalty to those companies that do not. Companies that fail to recognize the importance of the customer will face serious financial health and corporate viability problems. Bleuel; Stanely, 2007) Research into Royal Bank’s customer base revealed that 60% of its customers were unprofitable. Customer analysis helped develop new packages better suited for RB’s customer needs, offering more features and prices.

One year later 84% of its customers were profitable. (Kuykendall. L., 2002) The key is to find a rational way to offer customers what they want, in ways that allow you to make money doing it. (Roper, 2005) The companies which are achieving the greatest success share the same obsession: making the customer the centre of everything they do. Ryder, 2007) Consumer focus needs to become less of a trend and more of a standard operating procedure among companies from today and not in ten years time. (Ryder; Balton, 2007) Corporations need to recognize the impact of customer satisfaction on their financial performance and market share and include a strong customer focus component in their strategies. (Bleuel. W; Stanley. J. D., 2007) Customer actions are based on their perception of quality and satisfaction, more importantly; only the actual acts by customers influence the firms’ profits and long-term profitability and success.According to Richard L Griffin, “if customers don’t spend their

money with our business, we don’t work. ” Therefore, summarising the notion that customers are more important than employees. Customers provide essential information for business success: Customers are also more important than employees in terms of providing businesses with the information they need to successfully deliver customer demands.

Utilising customer information through various forms of feedback is essential for business operations, because according to Jill Griffin, “a company’s ability to thrive depends on capturing appropriate customer data rom multiple points of customer contact: a Website click stream, email, telephone, a call center, a kiosk , and a direct sales force. ” Furthermore, the incorrect use of customer information could result in customer dissatisfaction, as their demands are not met. Thus, the customer and their demands should be placed at the centre of business operations. The customers tell us what they need, rather than what we think they need (Brownlow. R. B., 1997), and without this information, companies are essentially relying on guesswork to build their business.

A recent survey of 432 customers found that 87% of the respondents said sales people don’t ask enough questions about their needs (Griffin. J., 2005), supporting the notion that customer information is essential for business survival, highlighting the importance of customers for businesses today. When the information gained from customers is used correctly it can provide huge amounts of success and profits. (Moore. B., 2005) “Our success results from focusing on our customer needs and giving them what they want” (Brownlow. R. B. 1997) When customer information is used correctly it enables the company to individualize its response to each customer interaction and fulfill their needs. (Griffin. J. , 2005) Thus,

the correct use of customer information is critical as it promotes business survival and profits, supporting the notion that no business can exist without customers, highlighting their importance. Not understanding your customer’s demands plays a major part in customer dissatisfaction and turnover, which results in the spread of negative word-of-mouth. Furthermore, this adversely affects company profits and survival.Attracting new customers is much more costly then maintaining the existing customer base, therefore a focus must be placed on building loyalty and relationship longevity. American businesses spend seven times more money attracting new customers than trying to keep existing ones, says Bain and Co. consultant Frederick Reichheld.

Customers become more loyal when businesses act upon the feedback received by customers. In other words, satisfaction is an important and necessary mediating variable between employees’ efforts and customer retention. (Pascale, G., Quester, B. Chen, S, 2007) A recent study went on to further investigate the relationship between employee effort and customer retention.

The hypothesised positive relationship between employee effort and customer retention (H2) was not supported. This indicates that service employees’ efforts to deliver customer value, cannot directly result in customer retention. (Pascale, G., Quester, B., Chen, S, 2007) This raises the question of whether employees are necessary in some service industries.

“What better customer service is there than self-service? ” “It’s fast! ” “It’s accurate! “It’s convenient” “It’s confidential! ” (Karen Aho, 2008). Introducing self-service technologies not only benefit businesses in terms of reducing costs through job cutting, “the best place you can save money is by cutting jobs,” said Mark Damron, from Industrial Workers of the World, but also benefits the customer through financial savings and convenience. The following industry

examples of job cutting occurred in order to save businesses money. In 1988, 308,000 service station attendants worked in Australia, but by 2000 there were just 140,000 said Peter Honebein.

When United Airlines adopted automated check-in, the airline reduced its front staff by 36% and saved $35 million, Honebein said. On average, it costs airlines $3. 02 to check you in with an agent and just 14-32 cents if customers use a self check-in system, Forrester Research found. Thus, it becomes clear that in some industries the reliance on employees is significantly reduced through the use of self-service technologies (where applicable), supporting the notion that customers are more important than employees.

Self-service technologies benefit customers in two ways: financially and through convenience.Savings by companies such as United Airlines allows them to pass on their savings to their customers by offering cheaper air fares, thus financial savings. Two-thirds of Americans now use airline check-in kiosks, The Forrester Group found, 63% do so just to save time. 91% of shoppers surveyed said they’d use self-checkouts because of time savings, convenience, accuracy and speed. Thus, self-service technologies (SST) provides companies and their customers with substantial benefits, and statistics suggest it is a preferred option of service by customers today. Furthermore, if businesses are to understand their customers they would see the beneficial aspects customers place on SST’s and begin implementation.

This highlights the notion that customers are more important than employees in terms of the essential information they provide for businesses. Customers spread positive and negative WOM: According to recent studies, negative word of mouth (NWOM) can more accurately and dramatically predict decreases in company revenue than positive word of mouth

(PWOM) predicts revenue growth (Marsden et al. 005, Ferguson 2005). This confirms the effect of negative information on people’s attitudes and behaviour. (Samson. A; 2003). Research elsewhere has also shown that a negative experience has a greater impact than a positive experience on repurchase intentions (Mittal et al. 1998). As researchers on political ads have noted, negative information doesn’t only stick – it sticks longer (e. g. Weaver Lariscy & Tinkham 2004). Put differently, a negative experience decreases loyalty than a positive experience increases loyalty. Thus a customer’s ability to disseminate negative word-of-mouth should not be overlooked as it decreases company revenue and survival dramatically. Reinheld and Sasser (1990, p 105) state that “just as customer retention has a positive impact on profitability, customer defection can have negative impact. Defection by a long term customer can cause a dramatic loss and affect the bottom line much more quickly than defection by a new customer does.

” The average American company loses 20-40% of its customers each year.Recognizing this pattern and its severe impact on corporate competitiveness and profitability, a business must adopt a more long term approach to business: building customer loyalty through customer focus. Lost customers give Post-Switching negative word-of-mouth (PNWOM), and their negative WOM may prevent potential new customers from choosing the provider, but may also increase defection rates of current customers. The potential of customers to hurt the firm through PNWOM after having switched away can be detrimental to the success and profits of the business. Florian v Wangenheim; 2005) Therefore, it is essential that businesses adopt a customer focus in order to achieve customer satisfaction.

Customer satisfaction is defined as a pleasurable level

of fulfillment in a consumption-related situation (Oliver, 1997). Satisfaction has been found and discussed as the key concept to explain customer word of mouth (e. g., Anderson 1998; Westbrook 1987). It is clear that losing customers due to dissatisfaction can be more harmful than businesses think. This is because the price of attracting new customers is so excessively high.

Statistics show that on average, businesses spend seven times more money attracting new customers than trying to keep existing ones, says Bain and Co. consultant Frederick Reichheld. Keeping the current customer base satisfied is essential for the firm’s survival as a study by Marketing Metrics tells us that the probabliltiy of selling something to a prospect is only about 5-20%, while the probability of selling something to an existing customer is 60-70%, (Griffin. J. ,2005) because a happy customer is likely to sample your other products and services. (Griffin. J., 2005) Businesses need to recognise the impact of customer satisfaction on their financial performance and implement a strong customer focus strategy (Bleuel. W; Stanley, J. D., 2007).

Therefore, it becomes clear that customers are much more important that employees in relation to their ability to spread negative word-of-mouth with relative ease, thus making the customer a protagonist for business success and failure. Conclusion: It is therefore evident that there is overwhelming support behind both sides of the argument. While there is support behind the superior importance of employees through profitability enhancement, organisational contributions and reduced turnover, there is conversely significant support of the counter-argument; that customers are more important as no business can exist without customers, they are essential in information transfer and their key role in the

word-of-mouth communication. As a result of this critique, it can be positively concluded that employees and customers are in fact interdependent to one another due to the nature of service provision and facilitation (Storbacka et al. 1994).In an era of such extensive transactions and service availability, the concept of interdependence is further supported through the value placed on the connection between the two parties; the customer experience, and that this bridge is the platform for enhanced effectiveness in the future (Ryder. 2007).

References

1. Aho, K., ‘Where has all the help gone? ’, Money Central; published April 4, 2008, viewed April 10, 2008
2. Anderson, James C. and David G. Gerbing (1988), "Structural Equation Modeling in Practice: A Review and Recommended Two-Step Approach," Psychological Bulletin, 103 (May), 411-23.
3. Anonymous, ‘The Loyalty Advantage’Incentive. New York: Sep 2005. Vol. 179, Iss. 9; pg. 40, 4 pgs
4. Anonymous, ‘Making Customers Trendy’, Library Management, Bradford: 1994; Vol. 15, Iss. 5; pg. 22
5. Anonymous, ‘TQM: Forging ahead or falling behind? ’, HR Focus; Jul 93, Vol. 70 Issue 7 Pg. 24
6. Berry, L. L. ‘Relationship marketing of services - Growing interest, emerging perspectives’ Academy of Marketing Science Journal. Greenvale: Fall 1995. Vol. 23, Iss. 4; p. 236 (10 pages)
7. Bleuel, W., Stanley, D. J., ‘Customer Focus: One Key to Financial Success’ Business Renaissance Quarterly; Summer 2007; 2, 2: ABI/INFORM Global, Pg. 1
8. Brownlow, B. R., ‘The importance of customer focus’, Journal of Accountancy; Apr 1997;183, 4; ABI/INFORM Global, Pg. 63
9. Byus, K., Lomerson, W. L., ‘Consumer originated value: A framework for performance analysis’, Journal of Intellectual Capital; 2004; 5, 3; ABI/INFORM Global pg. 464
10. Chung-Herrera, B. G., Goldschmidt, N., Hoffman, K. D., ‘Customer
    

and employee views of critical service incidents’ The Journal of Services Marketing. Santa Barbara: 2004.Vol. 18, Iss. 4/5; pg. 241

knowledge across borders’ Foreign Direct Investment. London: Apr 2006. pg. 1

of Brand Management; Oct 2007; 15, 10 Pg. 85-88