Magazine article Management Services

The Bottom Line: Commitment Creates Cash

Magazine article Management Services

The Bottom Line: Commitment Creates Cash

Article excerpt

With more committed staff companies could be boosting their sales by up to 200,000 per month, says a report published recently by the independent Institute for Employment Studies (IES).

Extensive research conducted among 65,000 employees and 25,000 customers in almost 100 stores of a major UK retailer showed a clear link between staff commitment, customer loyalty and sales growth. The study also showed that customer satisfaction by itself played only a lesser role in improving sales, compared with customer loyalty. The report therefore criticises businesses which pay insufficient attention to the so-called 'service-profit chain'.

"Most service sector businesses want to maximise customer satisfaction. This is because they believe that happy customers spend more and stay loyal" said Linda Barber, IES Research Fellow, who led the research.

"Our work has demonstrated the vital importance of satisfied, committed and well-managed staff in helping businesses achieve this aim. This link between employees, customers and profits has been called the 'service-profit chain'."

The IES report, From People to Profits, presents a robust test of the service-profit chain in a large UK retail business and shows that:

there is a clear statistical link between employee commitment, customer satisfaction with service, and an increase in sales.

customer satisfaction in itself, however, represents a weak link in the chain unless it is accompanied by customer loyalty (ie an intention to spend again)

a one point increase in employee commitment can lead to a monthly increase of up to 200,OOO in sales per store. …

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