What Drives the Quality of Customer Experiences in Service Marketing

What Drives the Quality of Customer Experiences in Service Marketing — Employees or Corporate Brands?

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In today’s increasingly technology-based soci-

ety, consumers have discovered the convenience and benefits of shopping online. However, this

has left a gap in personal interactions between conSpring 2011

sumers and companies. Despite this fact, there is still

a need for high-quality customer service when those 26

Customer Care News

interactions

do

take place. The

following report

from the Forum for

Pe o p l e

Performance

Management and

Measurement examines how a

customer’s business relationship

with a company as a whole may be influenced by per-

service encounters and relationships. A key aspect of that

a study by Dr. Frank Mulhern, academic director of the

involve personal connectivity. Oddly, the popular focus on

sonal contact with an employee. The report is based on Forum and associate dean of research at Northwestern

University’s Medill School, titled, “The Employee or the

Company: The Relative Importance of People Versus the Company Brand on the Customer Experience.”

When business was indeed “personal”

Long before Internet commerce and “big box” retail-

ers came to the retail scene, commercial transactions involved personal relationships between buyers and sellers. Merchants such as mom-and-pop grocers, tailors and shoemakers knew their customers personally. Buyers and

sellers enjoyed ongoing interpersonal connectivity that spanned their personal and business lives.

The rise of modern business brought with it a de-

personalization of retail commerce as large corporations supplanted small enterprises. As a surrogate for personal relationships and what they embody, including

trust, authenticity and personality, corporations turned to branding. Brands, largely through non-personal media communications, fill in the gap created when business

distinction is that relationships matter most when they

relationship marketing over the years has been far more about data and software systems than the most important element of relationships — people.

While research has identified business character-

istics and attributes that establish a strong bond with

the customer, at the heart of these relationships is “treating customers as valued individuals”

(Bhatty,

Skinkle

and

Spalding

Ultimately, employees

2001). it ’s

who

can improve cus-

tomer satisfaction

In today’s increasingly technology-based society, consumers have discovered the convenience and benefits of shopping online. However, this has left a gap in personal interactions between consumers and companies.

in their roles as

the living brand of the organization, and display strong,

positive

interaction

established customers.

with

potential

and

No matter the type of business, employee perceptions,

transactions take place between customers and large de-

attitudes and behaviors are central to the customer’s expe-

This report addresses the distinction between busi-

of the chief shortcomings that undermine a company’s

personalized businesses.

ness-as-brand and business-as-people. It evaluates, from the consumer’s perspective, the relative importance of

people versus the corporate brand in a service-marketing context. The study explores the idea that consumers may

be more interested in personal relationships than the corporate brand.

In the book, A Brave New Service Strategy by Barbara

Gutek and Theresa Welsh, a distinction is made between

www.customercarenews.com

brand and reputation. In one example, during the early

2000s, The Home Depot, in a cost-cutting move, termi-

nated many of its full-time home improvement experts/

sales people and hired in their place less experienced, part-time staff. During that time period, customer service and sales plummeted, and the value of Home Depot

stock slipped eight percent while its rival Lowe’s saw its

stock price climb 180 percent. Acknowledging its mistake,

Spring 2011

The role of people in service relationships

rience with a company. Poor customer service, then, is one

Home Depot reinstated many of those full-time positions, and sales ultimately recovered.

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Insurance industry as a model for service industries

The Forum’s study focused on the personal insur-

levels of individual sales agents for a national insurance

However, the experiences discovered through the course

to the company overall. A key element of the analysis is

ance industry (life, health, auto and property insurers). of the research and the findings themselves are central to

many service industries including health care, financial services and education, as well as smaller personal services, such as home repair.

The insurance industry in the United States is highly

fragmented, and comprised of more than 100 brands, with few of those brands reaching top-of-mind (first recall)

awareness, according to a study by Branding Strategy Insider.

Having a network of knowledgeable, helpful and trustworthy sales agents is crucial to customer satisfaction and financial success.

In

addition,

the emotional connection to

that the customer perception metrics are aggregated by

sales agents, allowing for precise assessment of the relationships between sales agent engagement metrics and customer perceptions.

Data collected for the research consists of three major

components. They are:

• Customer Satisfaction Survey: The insurance company conducted a customer satisfaction survey, administered online, that included questions about the quality of the experience with the sales agent and the quality of the experience with the company overall.

• Employee Engagement Survey: All sales agents were

low, with pre-

administered online as part of a series of admin-

brands is very

considerations, suggesting that the category is commod-

asked to complete an employee engagement survey istrative tasks that agents are required to conduct online.

ity-like for many consumers. The very nature of buying

• Employee Performance: A limited set of individual

task by the consumer since he or she usually doesn’t see

tomer retention rates and the change in the number

insurance may be viewed as a rather negative “must-do” an immediate benefit to the purchase. The buyer’s interactions with the company — carried out through a personal

performance standards were used to measure cusof outstanding insurance accounts over time.

connection to an agent — then become very important in

Results — experiences with agent versus company

ance companies have an opportunity to set themselves

asked to rate their overall experience with the sales agent

ceed. Having a network of knowledgeable, helpful and

on a scale ranging from “extremely positive” to “extremely

how the company is viewed overall. This is where insurapart from their competition in order to grow and suctrustworthy sales agents is crucial to customer satisfaction and financial success.

The insurance industry is an excellent arena for inves-

tigating the role of front line personnel in the customer

experience because insurance is a significant high-involvement purchase that can result in long-term, customer-to-company

relationships. Meanwhile, the insurance industry is struggling

with whether to maintain networks of independent sales agents

In the customer satisfaction survey, customers were

and, separately, their overall experience with the company negative.” The mean rating for the agents was signifi-

cantly higher than the mean rating for the company. This result shows that on average customers rate their agents

How the research unfolded

higher than they rate the company with respect to the quality of their experience.

Evaluation of the scores on an agent-by-agent basis

shows that more than 90 percent of the agents scored

The key implication is that the agent is the “public face” of the company, and plays a positive, measurable role in the customer experience.

higher on customer satisfaction with the agent than with

the company itself. There are a number of possible reasons why

a customer would rate an agent higher or lower than the com-

versus selling through their own sales force. Direct selling

pany overall. Customers interact with agents differently

required), but eliminates the opportunity for the personal

insurance product, filing a claim or any other transaction

allows for lower premiums (no sales commission payments

Spring 2011

company to the ratings customers gave to the agents and

insurance

mium prices/rates ranking as one of the top differentiating

relationships between the company and the customers.

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The analysis performed matched the engagement

than they do with the company. When purchasing an

with an agent, customers have a personal interaction with

Customer Care News

the agent either in the agent’s office or the customer’s

a strong, positive brand reputation, it may have more to

the company is limited to a website visit or contact with

in the company’s reputation.

home, or by phone. In contrast, customer interaction with

a customer call center, whose representatives are likely to

gain by investing in its employees than in investing more Investments in employees could include sales and

be different each time a customer phones.

product information training, meaningful incentives and

advertising used by an insurance company compared with

opment, extension of

It’s interesting to note the differences in the types of

its agents. The company advertisements are generally

expensive (network television and magazines) but impersonal. However, the agent ads generally appear in local

newspapers and weekly “shopper” publications, usually with a photo of the agent. Agents earn additional goodwill through community involvement such as board memberships and sponsorships. The key implication is that

the agent is the “public face” of the company, and plays a positive, measurable role in the customer experience.

The engaged, high-performing agent

Research results from the employee engagement sur-

vey and employee performance standards showed that the customers’ rating of the agent is closely associated with

the performance of the agent. The study found that the agents in the top quartile

in terms of both engagement and customer satisfac-

tion had significantly higher levels of account growth and

customer retention. In other words, when an employee had

a strong relationship with the

company, and the customer similarly had a strong rela-

rewards, career devel-

benefits, and improved

compensation.

Interestingly, a Mintel Comperemedia online survey of 275 insurance

agents

found

When an employee had a strong relationship with the company, and the customer similarly had a strong relationship with the employee, the organization realized the greatest performance results

that a majority of

agents (63 percent) prefer web-based sales and product training that allow them to learn in their offices while

continuing to serve customers and build their businesses.

This suggests that insurers should recognize the prefer-

ence and provide agents with support and incentives that simplify their efforts, rather than distracting them from their core goals.

It also suggests that all companies should look for

Companies that truly care about their employees and customers and constantly change their products and services to meet changing consumer needs will succeed at the expense of companies that are purely sales driven. This represents a true peoplefirst approach to business.

tionship with the employee,

creative and sensible ways to

engage

employees

in

an effort to enhance the joint

employee-customer

experience.

Companies

that

truly

care about their employees

and customers and constant-

ly change their products and services to meet chang-

ing consumer needs will

the organization realized the greatest performance results.

succeed at the expense of companies that are purely sales

the best performance is achieved by both having highly

business. CCN

This represents a very large effect and underscores that engaged employees and satisfied customers. It also shows

driven. This represents a true people-first approach to

that focusing on employee engagement is not enough.

The Forum for People Performance Management and

employee engagement is paired with a high-quality cus-

Marketing Communications (IMC) graduate program at

Performance improves the most when a high level of tomer experience.

What it means for business and steps for improvement

A key conclusion of the insurance study, as it applies

build relationships with individual employees more than

a corporate brand. This suggests that when a company has

www.customercarenews.com

Northwestern University. A central objective of the Forum is

to develop and disseminate knowledge about communications,

motivation and management so that businesses can better design, implement and manage employee engagement both inside and

outside an organization. To view the full text of the research

Spring 2011

to other service-oriented businesses, is that customers

Measurement is a research center within the Medill Integrated

paper, please visit the Forum website at www.performanceforum.org/research. Contact the Forum at 630-369-7780.

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