New research by Melbourne Business School indicates that the impact on business of staff retention is even greater than commonly supposed. When one customer-facing member of staff leaves a company, the fall in custom can be 30%.
The study, by Lester Johnson from Melbourne Business School and Liliana Bove from the University of Melbourne in Australia, found it is highly effective to invest in retaining good staff who are well liked by existing customers.
‘Keep hold of your good staff and you are far more likely to prevent the customers you can't afford to lose, from defecting,’ Professor Lester said.
Despite the logic and evidence that support such human capital strategies, it is still the exception that analysis of retention of strong performers informs major business decisions in a systematic way.
The Melbourne study indicates that in a service industry, customer loyalty is either tied to the store or tied to a particular worker. Personal loyalty, which refers to loyalty that's tied to a particular worker, is a strong driver of store or service loyalty.
Professor Lester said that when a valuable staff members leave, even if customers do not defect immediately, their loyalty to the firm is often weakened, so that they are vulnerable to competitive offerings from a competitor.
Client retention is closely tied to employee retention, which is largely within the control of the service manager or owner. In the study, based on hairdressing salons, he divided clients into different categories such as ‘true loyals’, ‘latent loyals’, and so on.
a recommendation from the study is to identify customer profiles, and to recognise that converting a client to a ‘true loyal' means firms need to convert their attitude and ensure it is easy, affordable, convenient and pleasant for them to frequent the salon.
Half of the ‘true loyal' customers who switched service providers in the study did so because their hair-stylist had left.