Optimizing the Profitable Link Between Employees and Customer Loyalty Behavior

Strengthening Bonds Driving Customer Commitment © 2007 Harris Interactive Employee Ambassadorship: Optimizing the Profitable Link Between Employees and Customer Loyalty Behavior Michael Lowenstein, PhD CMC Vice President and Senior Consultant Harris Interactive Loyalty

Harris Interactive Loyalty Concept & Model of Customer Commitment Strengthening Bonds & Building Relationships HARRIS INTERACTIVE Loyalty

EMOTIONAL Based on Trust

Sense of personal relationship with brand or company

Reinforced by service experiences

Supported by customer touch points

RATIONAL

Based on Satisfaction

Relationship based on meeting functional expectations

Reinforced by ongoing performance quality

Value for the money

RATIONAL CONNECTION EMOTIONAL CONNECTION Defining Rational and Emotional Bonds

Conceptual Framework: The Commitment Model Relationship Diagnostics Relationship Conditions Emotional Connection Commitment Dimensions Commitment Rational Connection PURCHASE ENVIRONMENT Trust Satisfaction Product Satisfaction Price Competitiveness Emotional Connection Rational Connection CONTRACTUAL COMMITMENT ROMANCE ACQUAINTANCE Corporate Reputation Policies Service Satisfaction

Conceptual Framework: The Role of Advocacy

Committed customers are more likely to turn into active Advocates.

True Advocates actively tell others how great the brand or company is.

Advocates create brand momentum.

Saboteurs can actively destroy reputations.

Emotional Connection Rational Connection WEAK STRONG STRONG Emotionally Connected Disconnected Rationally Connected Committed ADVOCATES SABOTEURS

Connection of Employee Attitudes and Beliefs to Customer Behavior HARRIS INTERACTIVE Loyalty

The Role of People… Why They Can Be So Critically Important 70% 41% 68% … of customers LEAVE because of poor employee attitude … of customers are LOYAL because of a good employee attitude … of customer brand perception is determined by experiences with PEOPLE UK retailer: 1% increase in employee commitment = 9% increase in monthly sales Enterprise IG Source: Parkington and Buxton, Study of the US Banking Sector, Journal of Applied Psychologyy Source: MCA Brand Ambassador Benchmark Source: Ken Irons, Market Leader

Why Do Customers Stop Doing Business With a Firm? Why Do Companies Lose Customers?

Customers who complain to an organization and have their complaints satisfactorily resolved, tell an average of 5 other people about the good treatment they received, and 20 people if they receive poor treatment.

Of the customers who register a complaint, between 54% and 70% will do business with the organization again if their complaints are resolved. This figure goes up to 95% if the customers feel the complaints are resolved professionally, quickly and proactively, depending upon both systems and positive employee attitudes and behaviors.

The Technical Assistance Research Program (TARP) studies show:

Further Proof Points of Employee Attitude/Action Linkage to Customer Behavior

Northwestern University : Study in hotel chain showed that, for ‘The extent to which employees try to satisfy customers’, a 10% increase in this factor resulted in a 22% increase in customer spending per hotel visit.

Sears : Study in 800 stores showed that a 5 percent documented improvement in employee attitudes toward their jobs and commitment to the company directly resulted in a 1.3% increase in customer perceptions toward the retailer and, in turn, a .5% increase year-over-year revenue.

Royal Bank of Canada : Studies have shown that level of employee commitment accounts for 60% to 80% of bank customer satisfaction; and 40% of the difference in how customers view RBC’s services can be linked directly to their relationship with bank staff.

Employee Mirroring Research HARRIS INTERACTIVE Loyalty

Conceptual Model of Service Quality (Berry/Parasuraman/Zeithaml SERVQUAL Model, Updated in 2000 ) Word-of-Mouth Communications Personal Needs Expected Service Perceived Service Service Delivery Service Quality Specifications Management Perceptions of Customer Expectations CUSTOMER PROVIDER Past Experience External Communication to Customers GAP 1 GAP 5 GAP 3 GAP 2 GAP 4

Employee ‘Mirror’ Research: Customer-Supplier Perceptual Gap Profiling

Valuable staff debriefing device

Counterpoint for customer research findings; adds significant, unique insight

Alignment determination is foundation for training and process improvement

Can be utilized for employee incentive and motivation programs

Effective for staff communication continuity

Measuring Customer and Staff Alignment Significant misalignment * Based on % 6/7 performance ratings on a 7-point scale

Mirroring (Overall) – Satisfaction with Performance Areas Q820 How satisfied or dissatisfied, overall, do you feel Level 3’s external customers would say they are with the organization’s performance on . . . ? Base: Employees – Total (n=4552); CMG/WMG/EMG – Total (n = 69-101); BMG – Total (n=239-260)

Chart displays Top 2 Box Scores

(ratings of “6” or “7”)

35% 38% * Employee Rank Ordering of Importance (#1) * Top 2 Box score from employees. Note: Attributes are rank-ordered by CMG/WMG/EMG importance. 14% 36% 33% 16% 20% 30% 19% 2 7 4 6 8 9 3 1 5 Top 2 Box score from employees overall. Top 2 Box score from CMG/WMG/EMG customers, overall. Top 2 Box score from BMG customers, overall. The importance employees think customers attach to the specified attribute/area.

Perceived Performance Gap Profile Staff vs Special Education vs Mainstream Subject Areas * Based on % high (5) performance ratings on a 5-point scale High Performance* Special Education Mainstream Staff 70% 90% 50% 30% 10% 1. Simplicity of materials 2. Appropriateness of materials for reading levels 3. Overall cost 4. Responsiveness to service requests 5. Shipment accuracy 6. Range of mainstream materials available 7. Range of remedial materials available 8. Effectiveness in helping reach teaching goals 9. Overall graphic content 10. Contemporary nature of material 11. Speed of order delivery Overall Performance

Employee Mirroring: Customer Need Importance Perceptual Gaps Relative Importance Of Issue Actual vs. Perceived Customer Needs

Defining the Employee Ambassador Research Framework HARRIS INTERACTIVE Loyalty

Employee Research Approaches Employee Satisfaction, Values, and Loyalty Employee Engagement and Alignment Employee Commitment and Ambassadorship (Advocacy) Employee Attitudes and Behaviors Research

Definitions of Employee Research Concepts and Methods

Employee Satisfaction and Loyalty – Identifies employee attitudes and behaviors leading to job satisfaction and employer loyalty

Employee Engagement and Alignment – Identifies employee attitudes and behaviors leading to agreement with, and belief in, overall company mission and objectives, as well as ‘fit’ and productivity within organizational culture

Employee Ambassadorship – Identifies the most active level of employee commitment to the company’s product and service value promise, to the company itself, and to optimizing the customer experience. It is linked to, but distinctive from, the productivity and empowerment elements of employee satisfaction, engagement, and alignment research because its emphasis is building customer bonds through employee interaction.

Customer Commitment and Advocacy Optimizing Customer Experience and Relationships Linking Customer and Employee Commitment to Business Results Strong Correlation Weak and Intuitive Correlation Customer Loyalty TQ and Satisfaction Employee Commitment and Ambassadorship Employee Engagement and Alignment Employee Satisfaction & Loyalty C U S T O M E R R E S E A R C H E M P L O Y E E R E S E A R C H Now Now 1990’s 1990’s 1980’s and earlier 1980’s and earlier

Personnel Psychology Volume 54 Issue 1 Page 101 - March 2001 To cite this article: DANIEL J. KOYS (2001) THE EFFECTS OF EMPLOYEE ATTITUDES, ORGANIZATIONAL CITIZENSHIP BEHAVIOR, AND TURNOVER ON ORGANIZATIONAL EFFECTIVENESS: A UNIT-LEVEL, LONGITUDINAL STUDY Personnel Psychology 54 (1), 101–114. THE EFFECTS OF EMPLOYEE ATTITUDES, ORGANIZATIONAL CITIZENSHIP BEHAVIOR, AND TURNOVER ON ORGANIZATIONAL EFFECTIVENESS: A UNIT-LEVEL, LONGITUDINAL STUDY DANIEL J. KOYS Department of Management DePaul University Abstract This study addresses the issue of whether positive employee attitudes and behaviors influence business outcomes or whether positive business outcomes influence positive employee attitudes and behaviors. We hypothesize that employee satisfaction, organizational citizenship behavior, and employee turnover influence profitability and customer satisfaction. Data were gathered from the units of a regional restaurant chain via employee surveys, manager surveys, customer surveys, and organizational records. Cross-lagged regression analyses show that employee attitudes and behaviors at Time 1 are related to organizational effectiveness at Time 2.

Issues Affecting Staff Belief in Employer and Brand Lower Brand Higher Brand Loyalty Loyalty Percent Employee Product Perceptions Employees Employees Difference Greater number of features than competitor 28% 48% +20%* Higher overall quality than competitor 41% 73% +32% Better overall value than competitor 38% 65% +27% More prestigious than competitor 34% 58% +24% More durable than competitor 36% 50% +14% More reliable than competitor 32% 59% +27% Employee Attitudes Toward Employer Company is customer-focused 32% 59% +27% Proud of company 28% 48% +20% Company is well-managed 38% 65% +27% Like working for company 41% 73% +32% * Actual difference is +71% (48%/28%) Source: Fram and McCarthy, Marketing Management, Jan./Feb., 2003

Employee Ambassador Research Concept

In active refinement. Goal is to create a framework consistent with the customer Commitment Model and Harris Interactive Loyalty enterprise portfolio and platform, representing a suite of stakeholder loyalty solutions

First generation baseline in September, 2006 conducted using Harris Poll – 612 overall full-time employees working for a company, 441 full-time service employees. Comprised of 13 core questions designed to identify the level of commitment to the value proposition, enterprise and customer.

First generation beta test in October, 2006 for 2,622 employees of leading Las Vegas hotel/casino; results reported January, 2007

Second generation development encompasses qualitative research delving into emotional and rational dimensions of employee commitment, followed by quantitative refinement of final item battery.

Employee Commitment Categories Employee Saboteurs – employees who, though still drawing a paycheck from the company, are active, and frequently vocal, detractors about the organization itself, its culture and policies, and its products and services. These individuals are negative advocates, communicating their low opinions and unfavorable perspectives both to peers inside the company and to customers, and others, outside the company Disinterested Seatfillers – employees who, because of their lack of interest, favorability toward or kinship with the company and its products, either do not communicate positive messages about the company internally or externally, or do not communicate at all. For these minimally involved members of staff, employment with the company is ‘just a job’, and very little more. Passive Contributors – employees who are generally satisfied with their jobs but rather ambivalent to mildly positive about the company overall, their relationship with it, and its products. They may communicate some generally positive messages about the company to others, but rarely and inconsistently. Positive Loyalists – employees who exhibit positive feelings about their job and emotional kinship with the company. They are favorable about the company, overall, have every intention of remaining with the company, and actively and positively perform on its behalf. Though their communication about the company to others is infrequent to nil, when they do communicate, the messages are largely positive. Employee Ambassadors (Advocates) – the most active level, representing employees who are strongly committed to the company’s brand promise, the organization itself, and its customers. Also, and importantly, they behave and communicate in a consistently positive manner toward the company, both inside and outside.

Presentation of First Generation Findings HARRIS INTERACTIVE Loyalty

Overall Ambassadorship Method Findings * weighted 9% 15% 25% 28% 23% 2,622

All Employees

11% 20% 27% 27% 15% 612*

Overall Full-Time Employees, working for a company

Las Vegas Hotel/Casino 9% 16% 27% 31% 15% 441*

Overall Full-Time Service Employees, working for a company

Harris Poll – 9/06 Employee Saboteurs Dis-interested Seatfillers Passive Contributors Positive Loyalists Employee Ambassadors N

Harris Poll Service Employee Baseline Results Thoughts/Feelings About Company Percent I trust the company I like the company (16%)* (18%)** (20%)* (8%)** * = Top Box % on 5-point description scale ** = Bottom Box % on 5-point description scale Employee Ambassadors Employee Saboteurs

Harris Poll Service Employee Baseline Results Thoughts/Feelings About Job Percent I very much enjoy doing my job The work I do provides valuable services and/or products to customers * = Top Box % on 5-point description scale ** = Bottom Box % on 5-point description scale (18%)* (6%)** (30%)* (5%)** I am very committed to my work (32%)* (2%)** Employee Ambassadors Employee Saboteurs

Harris Poll Service Employee Baseline Results Company Attributes/Diagnostics Percent The organization is well-managed The organization is focused on attaining the highest quality possible * = Top Box % on 5-point description scale ** = Bottom Box % on 5-point description scale (12%)* (16%)** (25%)* (6%)** The organization is very loyal to its employees (13%)* (16%)** Employee Ambassadors Employee Saboteurs

Harris Poll Service Employee Baseline Results Comparative Assessments (Fram & McCarthy Diagnostics) Percent # of product/ service features we provide Overall product/ service quality * = Percent rating their company ‘Much Better’ compared to competition (5-point scale) (29%)* (33%) (31%) (29%) (34%) (25%) (30%) Overall value of product/ service Trust among customers Long-term relationships with customers Perceived prestige of the organization Benefits of products/ services to customers Employee Ambassadors Employee Saboteurs

Comparisons of Key Results Fram & McCarthy Employee Brand Champions and Employee Ambassadorship * = Element of employee ambassador technique Saboteur to Ambassador (Difference in % Points) Low to High Brand Loyalty (Difference in % Points) +36 +24

Perceived prestige of organization

+37 +27

Overall value of products/services

+33 +32

Overall product/service quality

+64 +20

Proud to work for company *

+30 +20

Number of product/service features

+62 +27

Organization is well-managed

(Comparative) Attitudes Toward Employer’s Products/Services +65 +32

Like the company

Attitudes Toward Employer

Mirroring Diagnostic Elements (Top 2 Box Scores – 7 Point Scale)

Employee Ambassadors were dramatically more likely to rate Las Vegas Hotel/Casino highly when compared to Saboteurs

Guests are committed to continuing their relationship with the hotel Guests are loyal hotel customers Percent Top 2 Box Guests would continue to stay at the hotel because of the high level of personal service they receive Guests would continue to stay at the hotel because of the fun and fulfilling experience it provides Guests would continue to stay at the hotel because of the value of what they receive for the price Guests would continue to stay at the hotel because of the exceptional quality of the experience Guests All Employees Employee Ambassadors Employee Saboteurs

Mirroring Diagnostic Elements (Top 2 Box Scores – 7 Point Scale)

Employee Ambassadors were dramatically more likely to rate Las Vegas Hotel/Casino highly when compared to Saboteurs

The hotel will do whatever it takes to make guests happy The hotel has the guests best interest at heart The hotel will do what it takes to resolve any problems the guests have The hotel trends guests as valued customers The hotel exceeds guests’ expectations Guests feel they have a personal relationship with the hotel as their Las Vegas destination Percent Top 2 Box Guests All Employees Employee Ambassadors Employee Saboteurs

Swing Voter Analysis HARRIS INTERACTIVE Loyalty

Swing Voter Analysis of Employee Ambassadorship

“ Swing voter analysis” for Las Vegas Hotel/Casino employees, as it does in politics, deals with how to move the undecided and leaning “voters” into the desirable camp and how to avoid moving them into the undesirable camp.

In this case the desirable camp is the Employee Ambassador group and the undesirable camp is the Employee Saboteur group.

In particular, this analysis shows how to move Passive Contributors and Positive Loyalists, the two groups closest to becoming Ambassadors and therefore easiest to influence, into the Ambassador camp.

It also shows which attributes put at risk the employee groups that are closest to becoming Saboteurs, i.e. the Passive Contributors and the Disinterested Seatfillers.

Note, that the Passive Contributors are considered swing voters in either direction.

Ambassador/Saboteur ‘Swing Voter’ Analysis Disinterested Seatfillers Saboteurs Passive Contributors Positive Loyalists Employee Ambassadors What turns passive, positive employees into ambassadors? What turns passive, disinterested, negative employees into saboteurs? Swing Voters

Swing Voter Analysis Classification of Attributes

In swing voter analysis, key drivers are divided into three groups

depending on their unique contribution to employee growth and/or risk.

These are:

Delighters : Improving performance on these attributes will move swing voters into the ambassadors group while declining performance on them has little impact. These delighters tend to have impact if there is good employer performance where good performance wasn’t expected.

Dissatisfiers : Declining performance on some attributes will move swing voters into the saboteur group while improving performance has little impact. These dissatisfiers tend to have impact when there is poor performance where good performance is expected.

Dual Effects : These dual effect attributes show improved overall feelings about the hotel in both directions, i.e. they are associated with moving swing voters into the Ambassador camp with good performance as well as with moving swing voters into the Saboteur camp with poor performance.

The following chart shows selected attributes that are either delighters, dissatisfiers, or Dual Effects.

Swing Voter Analysis Importance Scores for Selected Attributes (“Swing Up” To Ambassadors, “Swing Down” To Saboteurs) Delighters Dissatisfiers Dual effects 4% 28% I trust the hotel 5% 2% I am very committed to my work - 4% The hotel will do whatever it takes to makes guests happy - 4% My immediate supervisor 6% 6% I feel a lot of stress at work 2% 6% The hotel is very loyal to its employees 23% 6% Overall value of service provided 10% 6% I very much enjoy doing my job The extent of diversity of co-workers I have a clear understanding of the hotel’s mission, goals, and objectives The hotel is focused on attaining the highest quality possible My work gives me a sense of personal accomplishment 8% - - 7% 13% 2% 4% 8% Swing Down Swing Up

Delighters ( Opportunities for Ambassadorship Growth)

Building employee trust and pride in the hotel (viewpoint that the guests believe

Las Vegas Hotel/Casino has their interests at heart), pride in their work and their

accomplishments at work, clear supervisory direction and training, and a clear

view to the potential of a promising future at Las Vegas Hotel/Casino all can create

a higher proportion of Employee Ambassadors at Las Vegas Hotel/Casino.

Primarily upside diagnostics (in order of importance):

I trust the hotel

My work gives me a sense of personal accomplishment

The hotel is focused on attaining the highest quality possible

My immediate supervisor

The hotel will do whatever it takes to make guests happy

Guests would continue to stay at the hotel because of the high level of personal service they receive

Diverse perspectives are valued and encouraged in my department

The safety of my workplace

My supervisor makes it clear what I am expected to do

Employees receive the training needed to serve guests

I feel I have a promising future at the hotel

How likely do you think it is that you will be promoted next year?

Trust, pride in hotel, pride in self, supervision, growth

Dissatisfiers (Risk of Decline)

Feelings of low self-esteem because of the perceived worth of their jobs,

feelings of isolation from the Las Vegas Hotel/Casino mission, its

management and fellow employees, feelings that they are not adequately

enabled to carry out their respective tasks, and beliefs that Las Vegas

Hotel/Casino is not a leadership resort all contribute to turning neutral

and disenchanted employees into Employee Saboteurs.

Primarily downside diagnostics (in order of importance):

Overall value of service provided

I have a clear understanding of the hotel's mission, goals and objectives

The hotel is committed to providing equal opportunities for all employees

I am kept well-informed about what's going on at the hotel

I have the tools, technology and equipment I need to do my job

There is team work between management and staff at the hotel

The hotel is a leader in its field

I have a sense of closeness with other employees at the hotel

Employees are recognized for delivering outstanding service to guests

Dual Effects

Levels of stress and job enjoyment, perceived levels of loyalty and commitment

(both ways) between the hotel and the employee, feelings about hotel management

overall, supervisory help in getting ahead, and the feeling that the services being

provided are valued by the guests all can create Employee Ambassadors, if

improved and Saboteurs if allowed to decline.

Opportunities (if improving performance) and risks (if declining performance) in order of importance:

I very much enjoy doing my job

I feel a lot of stress at work

The hotel is very loyal to its employees

The hotel management as a whole

I am very committed to my work

My supervisor helps me understand how to grow and develop

The work I do helps provide valuable services and/or products to the hotel guests

Summary Points HARRIS INTERACTIVE Loyalty

Key Summary Points

The Employee Ambassadorship Research Method has been designed to be conceptually consistent with, and complementary to, the Harris Interactive Loyalty customer Commitment Model, representing a key element of the stakeholder loyalty solutions portfolio.

It is distinctive from employee satisfaction and employee engagement research. At the same time, it connects to, and expands upon, these more traditional HR-based staff research techniques, linking employee attitudes, beliefs, and action propensities to customer loyalty behavior.

Early (first generation) baseline and beta findings show strong, unique actionability and promise. Since that time, we have conducted many employee ambassadorship studies. Harris Interactive Loyalty is currently conducting additional R&D to refine the approach.

For further information about Harris Interactive Loyalty’s Employee Mirroring and Employee Ambassadorship research techniques, please contact Michael Lowenstein, PhD CMC Vice President and Senior Consultant Harris Interactive Loyalty email: [email_address] Phone: 609-919-2524 Cell: 856-283-1182

Thank You!

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