Why emotionally engaged customers deliver bigger profits

This has been a tough year for economies around the world as credit markets and consumer spending remain constrained. The latest Gallup consumer research shows that consumer confidence in the UK and the US is improving somewhat, but spending levels in 2009 remain well below those in 2008. 

So  how can managing your company's employee and customer engagement help when markets are turbulent and trending down?

Against this bleak backdrop, retailers and other companies around the world are struggling to find ways to do more with less - and to keep moving forward against serious headwinds. Many retailers continue to trim budgets, lay off employees, and even close locations. While many of these steps seem like obvious and even responsible responses to the current economic environment, Gallup research suggests that there are other, perhaps less obvious, steps that companies can take to successfully navigate this sluggish economy and to buy time and remain financially viable until conditions improve. But instead of relying solely on cost curtailment, downsizing, and organisational realignments, these steps focus on optimising the human element of your business by engaging your staff and your customers.

For more than 10 years, Gallup research has consistently found that engaged workgroups are more productive and profitable -- and deliver superior customer outcomes -- compared to their disengaged counterparts. Engaged workgroups have significantly better staff retention, lower absenteeism, fewer accidents, and yield lower levels of "shrink" (e.g., theft or breakage) than disengaged workgroups. These kinds of cost reductions not only result in greater operating efficiencies, but those benefits accrue to your bottom line as well.

Gallup research also has consistently found that emotionally engaged customers deliver superior financial returns than disengaged customers. Fully engaged customers deliver a 23% premium in terms of share of wallet, profitability, revenue, and relationship growth than the average customer, while disengaged customers deliver a 13% discount. Moreover, local work units that engage customers at high levels deliver significantly better financial performance (on the order of two times better) than low-engagement units.

Gallup’s research, which is described in detail in the book Human Sigma: Managing the Employee-Customer Encounter (Gallup Press, 2007), suggests that optimising both of these human elements delivers significantly stronger financial performance than focusing on either in isolation. In fact, units in your organisation that simultaneously optimise both employee and customer engagement significantly outperform units that optimise just employee or customer engagement - or fail to optimise either element - on measures of financial and operational success.