Webinars
Succession Planning: Managing Risk and Ensuring Business Continuity
Sep 09, 2010

Breakfast Club
San Francisco: The Next Frontier for Learning and Development
Sep 23, 2010 07:30 am
The Ritz-Carlton, San Francisco
San Francisco, California

CLO Symposiums
Unleashing Learning: From Strategy to Execution
Sep 27, 2010 - Sep 29, 2010
The Ritz-Carlton, Laguna Niguel
Dana Point, California

Features

Published November 2007

How Loyalty and Employee Engagement Add Up to Corporate Profits

  

  Dianne Durkin

Two common questions in the business world are “What is loyalty?” and “How do you create loyalty both internally with your employees and externally with your customers?”

Loyalty is a commitment that is based on trust and positive rewards. People can be loyal to anything: friends, family, brands, companies, flavors of ice cream, etc. In business, loyalty is when customers consistently praise the products or services they receive. It also exists when employees feel committed to their employers and their companies. Loyalty is the result of repeated positive experiences.

Generally speaking, employees are loyal to a company when they connect to the purpose of their work and the vision of the company, and when they think their contributions are making a difference. Their loyalty leads to pride in their work, which means they are apt to produce a better product or provide a better service.

Customers show company loyalty through praise and repeat purchases, both of which are invaluable to a company’s success. Here’s why:

• It costs 10 to 20 times more to acquire a client than it does to keep a client.

• A Forum Corp. study shows more than 60 percent of customers who changed brands did so because of poor services or lack of personal attention.

• Tom Peters states that on average, a customer with a poor experience will tell nine to 10 people about it, and 13 percent will tell 20 or more of their closest friends and associates.

If customers tell others not to work with a particular company or talk about a bad experience they had, their friends definitely will shy away from doing business with that organization. Many people will “spread the word,” but this is not the word that you want on the street.

Yet, few people will complain to the organization itself. In fact, 25 of every 27 customers who have had a bad experience fail to report it because they don’t think anything will change.

Ninety-one percent of those who complain won’t come back, and it doesn’t matter if the purchase was worth $2 or $2,000 — they simply do not want to have another bad experience.

In Fortune magazine’s annual ratings of the “Most Admired,” “Best to Work For” and “Best Run” companies, loyalty is a fundamental judging criterion.

Management in these companies is dedicated to understanding employee, customer and shareholder needs. These companies clearly understand that loyal employees will make them solid and profitable and that unhappy, disgruntled (thus, disloyal) employees have the opposite effect.

The good news is that companies lacking employee loyalty can change their culture and build loyalty from the inside out. They can do this by instituting an employee engagement process. Here are the 10 most important elements to building a culture of employee loyalty and customer loyalty.