Employee Retention And Customer Relationships In Services Industry
Authors:   , O'Connell Aileen ,   Cork Institute of Technology
Published: July 2024

"The business environment of the 1990s has seen a shift in firms’ emphasis away from recruiting new customers, towards nurturing and retaining those that they currently have (Palmer, 1996). The marketing emphasis has moved from customer acquisition to customer retention. Reicheld, (1996a) has identified a link between customer and employee retention, but this link has not been extrapolated by many researchers. For the purpose of this study, the researcher proposes to examine this link. A large number of people who work for organisations are no longer what would be termed “traditional” employees of those organisations, i.e. employees for life. These trends are unlikely to reverse themselves anytime soon. In fact, they will probably accelerate (Drucker, 2002). Furthermore, a lot of firms are loaded with dead wood. For example, several companies are struggling with the problem of employees whose productivity stopped growing years ago. The old promise of lifetime employment attracted people who, in the new competitive environment, no longer earn their salaries. Cutting their defection rates will not create value. This problem is not confined to old-timers; in any company, some new hires turn out to lack the skills or motivation they need. Holding onto them destroys value (Reicheld, 1996a). The research centres on the pertinent topic of employee retention in the services industry, focusing particularly on the Hotel Sector. The link proposed by the researcher is one that has not been undertaken previously in the hotel sector in Ireland and thus can be seen as pioneering in this regard. Much research has been carried out on customer retention and indeed many researchers have examined the link between customer retention and increased profitability, however these studies focus generally on the links between customer retention and service quality, service recovery, customer satisfaction, sales revenue and profitability. The underlying principle of this research is the existence of a link between employee and customer retention. The researcher puts forward the concept that employee retention has an indirect impact on customer retention, as customers develop relational bonds with particular service employees and as a result continue to patronage the same service provider, thus resulting in the service achieving the much sought after customer loyalty. This study uses questionnaires to gather the perceptions of both employees and customers. In all 355 customer questionnaires and 187 employee questionnaires form the basis of the empirical research. The customer questionnaires were completed at Cork airport with outgoing tourists surveyed. The employee questionnaires were administered in ten different hotels and were completed by long standing employees working in various areas of the hotel. Both perceptions were vital in establishing the fact that employee retention has an indirect impact on customer retention. Other significant research findings show the important role that internal marketing plays in retaining employees, the necessity for employee empowerment and the importance of employees in improving customer satisfaction as well as retention ratings. In this era of Relationship Marketing, this research proves that the human touch is fundamental to customer retention in the services industry, and is the primary reason for customers returning to the same hotel."