Consumers Spend More At Places Where Employees Are Treated Well

Researchers at the Universities of Virginia and Colorado polled 1,615 retail employees, 57,656 customers, and 306 stores of a single retail chain to discover that how employees feel about their jobs has a strong impact on how well they do their jobs which, in turn, adds to customer spending and comparable store sales growth. A single digit increase (on a scale of seven) of ‘perceived organizational justice’ on employees led to customers spending $1.43 more per person per visit.

This paper is heavily based on the “Service/Value Profit Chain” work of Heskett and colleagues in 1994.

Heskett and colleagues’ work became an important element in the now popular Net Promoter Score. However, Maxham, Netemeyer, and Lichtenstein’s work goes beyond the basic constructs to quantify the linkages between beliefs and behaviors and introduces a predictive model (a kind of holy grail when it comes to making investments in retail).

My non-researcher’s translation of this line of work is:

Make the right promises (ones that matter to customers).

Keep them (put capabilities into your business design so that what customers want most is what the business does best).

Give employees the same kind of experience you expect them to deliver to customers (employee experiences matter too).

Design your experience as a story that engages customers, delights employees, and pays back shareholders (all at the same time).

Thanks to Anne Rein for bringing this work to my attention from HBR’s Daily Stat.