Secondary Data Review: Customer Retention in Other Organizations
The current business problem confronted by the real-world business organization in question is that of customer retention. Even after customers eagerly enter the office, brought through the door by a competent sales staff, the manner of the operations staff does not increase the customer loyalty because it provides a poor sense of customer satisfaction.
How does one increase the rate of customer retention? As noted in the article, "Delighting the customer," the Chief Executive of Norwest Company, noted that "interestingly enough - and this may be heresy - but we don't find focusing on customers per se the key to success. The key to developing loyal customers is our front-line employees. There is a one-to-one relationship between the satisfaction, the pride, the attitude of our front-line employees, and the satisfaction, loyalty, and good feelings for Norwest to our customers. So you only have to get your people to feel good about your company; they will automatically, and without any extra costs, translate that to your customers." (Donlon, 1997)
Statistically, the Chief Executive of Norwest noted that, without changing its recruitment techniques, by increasing the loyalty of its staff, the company also increased customer retention. Today, most of the 53,000 employees of Norwest own stock in the company, and that means all of the employees, not just sales staff or higher company authorities. Today Norwest is worth $1.7 billion. "It's 9% of the company. The senior executives own about $150 million, so it shows you how widespread the other $1.5 billion is. All employees at Norwest have stock options. And if you want people to do the right thing, have the right attitude, be dedicated, let them...
Even if a company cannot give stock to its employees, it can encourage a personal sense of investiture in the organization by tying employee performance to employee bonsuses, as is done often in sales and can be done in operations. (Donlon, 1997)
In another article analyzing factors that increase customer retention, "Loyalty boosts productivity, customer retention, and is even more important in hard times," after studying nearly 100 employers, author Frederich Reichheld says the typical company is lucky today if 50% of its workers believe it deserves their loyalty. But fostering loyalty boosts productivity, customer retention and referrals, attracts talented staff, and is even more important, he says, in a down market. (2001) Reicheld parallels a statisically significant correlative relationship between lack of employee loyalty with customer loytalty, saying that the two are meshed, statisically, namely that companies with low employee loytalty ratings show a correspondinly low customer loytalty rating as well. (Reichheld, 2001)
Long-term loyal customers are more valuable in financial terms than other customers to a company. Return customers generally buy more often, spend more, have a higher retention and referral rate, and are less costly to serve. (Reichheld, 2001) One company, an article titled "Agents of Change" stated, that after determining that a mere one percent increase in customer loyalty would reusult in almost a million dollars decied to tie all additional bonuses and incentives to renewal of membership in the organization, including follow…
