Low weight, no reps: how employee turnover hurts customer loyalty
How employee turnover hurts client loyalty
The “Hightown Body Fitness Place”, a health club that is part of a regional chain, is in an enviable position. Situated in an upscale neighborhood, the club can draw on lawyers and consultants by day and old money and body-conscious patrons at night. The club is flanked by at least two expensive colleges, sending an endless potential pool of coeds and jocks with spending money. The facilities are decent and spacious, such that crowding or waiting for machines is not a problem. The high-quality instructors offer popular classes.
And yet success eludes the club. The corporate “suits” swoop in and try to find ways to economize, such as putting an end to paper cups at the water cooler – but they miss a key factor. The staff is leaving – constantly. No on who worked in the club eighteen months ago, whether the manager, the fitness director, the trainers, the desk staff, even the cleaning crew, is still at the club. Employees greet clients and are gone, sometimes within months or weeks.
It’s not hard to understand why trainers, the primary service providers, are unable to stay. Body Fitness Place trainers make no salary, no benefits, and no paid vacations. Trainers keep a percentage of their personal training fees (while recruiting their own clients) and a smaller percentage of the fees for new member training. However, they make nothing on clients who perpetually continue to stay with the club, even though their unpaid advice, guidance, and encouragement to clients is a major factor in clients’ attachment to the club. They are also expected to encourage clients to patronize classes given by others, even though class attendance cuts into the likelihood of clients using them as personal trainers.
Putting the trainers in such conflicted roles and pitting the interests of the club against those of these employees’ interests puts the trainers in an untenable situation, leading to rapid trainer turnover. This frustrates the fitness directors, casts a pall over the climate for all employees, and hence leads to near-constant turnover.
Client Loyalty to Employees
How does this affect client satisfaction and retention? To understand this, we need to understand the connection between employee loyalty and client loyalty. The benefits of having a loyal workforce and controlling turnover in order to raise employee morale and satisfaction have been well documented. In his book The Loyalty Effect, Frederick Reichheld of Bain and Company goes one step further. He demonstrates convincingly that loyal employees provide better service and that they are more likely to retain customers and clients. He provides evidence that people will prefer to do repeat business and patronize the same vendor or professional even though they believe that others are more technically capable.
It may be farfetched to take this idea too far; it’s not likely that clients choose Coke versus Pepsi based on the tenure of the accountants or recruiters at corporate headquarters in Atlanta. However, the more that customers interact with employees on a regular basis, even if they are being sold tangible products, the more the customers will care about continuity and be disconcerted by turnover. This will be for one of two reasons – either they simply like to buy based on relationships, or they view turnover as a possible indicator that something is amiss in the company. When the employee is selling a service, relationships can become an even more important factor. Especially when the service involves advice and continuity, and the client expects the employee to pick up where he/she left off – such as physical therapists, hairdressers, and financial planners – the lack of consistency will be annoying and raise questions about the company. The customer will often blame the company for the disruption in service.
Companies and their leaders often ignore this, blindly believing that their branding is so strong that it trumps the importance of relationships. One well-known example is in the realm of radio stations and their on-air talent. It is often mystifying the way FM radio stations will build up their on-air personalities, and then, when those employees leave or are fired – they simply disappear. Disappear into the void! This DJ who the station wanted you to believe is the person who wakes you up, gets you to work, gets your adrenaline going and makes you forget your mood and your problems – this “friend’ is suddenly gone one Monday morning. Even calls to the station will get you nothing but stonewalling. Was your DJ embezzling, not making ratings, moved up to the New York affiliate, or simply quit to raise a child or go into management? It’s none of your business, you’ll love the new DJ, hear our jingle again about how we are family and do it all for you … yet the reality is that the consumer is now more cautious and skeptical and less likely to identify with the corporate brand.
The corporate managers at Body Fitness Place failed to realize that in order to retain loyal customers for the long haul, one should be aligning the work goals of staff to be supportive of customer-retention efforts. An exceptional trainer and manager (soon to be a former employee) noted that when staff work with clients on a consistent basis, they are able to bring the clients along from classes and occasional pointers to more intensive and lucrative personalized training. Conversely, when staff are constantly leaving, continuity is broken, clients are continually being taken down different paths by differently schooled trainers, and the clients are less likely to progress and upgrade their use of services. A staff that is continually distracted by crisis management is unable to focus on creating value for clients.
Employees have to have an incentive for increasing retention. They certainly should not be required to work at cross-purposes to the larger organizational goal of ensuring that existing members stay with this club. Without their own incentives to stay with the company, they will be hard-pressed to sell continuity and loyalty to others. To a greater or lesser extent, this will be true in all service industries – aligning employee and customer loyalty and continuity efforts will benefit both as well as the company as a whole.
Fred Mael (www.maelconsulting.com) is an organizational psychologist who does consulting in areas such as talent retention, organizational culture, and performance management, as well as executive and work/life coaching. This article appeared in the November 2003 issue of Baltimore SmartCEO magazine.