This week I filmed a cable show with a colleague of mine, Cherryll Sevy of Cypress Ridge Consulting, to explore the relationship between employee loyalty and customer loyalty.

We got started on this topic a month or so ago when discussing our respective work with clients: her focus is on employee retention and mine is on customer loyalty.  We are both passionate about helping organizations be more successful from our different perspectives…and we realized that our clients that don’t focus on ‘loyalty’ as a priority are least likely to emerge from this recession in a healthy position…or at all.

As we explored this topic, we found a multitude of information that supported our hunch about the link between employee and customer loyalty:

- Southwest Airlines is rated the #1 place to work in Glassdoor.com’s 2nd annual Employees’ Choice Awards.…is it just coincidence that this same organization rates as one of the highest in customer satisfaction/loyalty?

- Deborah Schmidt of Loyalty Leader, Inc. recently wrote an article, “Unhappy Employees Create Dissatisfied Customers“, that explores the many facets of this connection and provides some great advice to employees.

- Walker Information has been tracking the relationship between employee and customer loyalty for the past 8 years and finds that both types of loyalty consistently move in parallel to one another.

Given this strong connection, it’s a very bad omen to those of us who are passionate about customer loyalty that employee satisfaction is at a record low.  According to a study by the Conference Board, only 45% of U.S. workers are satisfied with their jobs compared to 61% in 1987…and the numbers have been declining over the past 20 years.

During a recession where companies believe that they are in the driver’s seat since unemployment is high, it’s especially vital to remember this inextricable relationship…if organizations don’t consider employee loyalty a priority, it will inevitably show up in the quality of their customer relationships.  Just remember the last time you had contact with someone from a company that had obviously ‘checked out’ and was unhappy with their job…how good was THAT experience?  What did that do for your commitment to that company?

Let’s all spread the word out there to not forget about the importance of employee satisfaction/loyalty…it’s common sense, but another area that is not common practice.

This is a blog entry by guest blogger, Reena Kapoor of Conifer Consulting.  Reena is a pre-eminent product marketing consultant and this entry shows one of her key values in the work she does with clients.

An excellent video talk by Joseph Pine on What Consumers Really Want. He talks about how we’ve evolved from economy that was based on commodities, to goods, to services and now its about creating and selling experience.  In this context, authenticity is the new consumer sensibility and it’s what consumers want to experience.  We’re hearing this with social networking/web 2.0 taking off as well.  But the question remains: what is authenticity and how do we (as businesses) render it effectively?

In preparing for a session of the Power of Market Research class that I teach at UCSC Extension Silicon Valley,  I was brushing up my ‘spiel’ about how to determine sample size for research studies (surveys, focus groups, etc.)…and realize that this is a mysterious concept that could use some plain talk.

Sample size is a very important element of any primary research.  Very rarely can you get input from everyone within your target group, so you need to figure out a way to ensure that you have a ‘sample’ of the group that is big enough and representative enough of the entire group to provide ‘reliable’ results—in other words, how many people do you need in order to predict how the entire group you are researching thinks/feels?

When determining sample size, you want to think about the reliability of your consolidated results (the input of all respondents/participants) as well as the reliability of the data you receive for any groups/segments you are analyzing.  For example, if you are going to segment your results by household income or annual revenue, you need to make sure that you get enough respondents in each category of income or revenue to provide reliable results.  This will mean that you need many more respondents than required to provide reliable results for the consolidated group as a whole.

Click here for a tool to help determine the sample size you need to get reliable results, based on the size of your target group and the confidence interval you are aiming for.  Tip: I suggest using a 95% +/- 10% confidence level as a good goal for how reliable you want your data to be.  Using that approach, for any target group consisting of 2000 or more people, you would need about 90 respondents.

Hopefully this info will help you increase the validity of your data and, more importantly, your own confidence in the data you gather.

Guest blog by Mary Sullivan of KickStart Alliance

You’ve heard the adage, “It costs five times as much to attract a new customer as it does to retain an old one.” Even if you question the multiplier number, you know the concept is valid. And yet, businesses don’t always realize when former customers have decided not to buy from them again.

One possible clue: sales are down. Granted, in a recession most everyone’s sales are down, but this is not a time to get complacent. Another clue: people are bad-mouthing your business online. How would you know that’s happening? There are many tools that allow you to monitor whether anyone is talking about you on social networks.

Customers decide not to come back to a business when they have expectations that the business, service or product are not fulfilling. Invariably, they find an alternative. There goes somebody’s market share.

The trick is to learn what customers expect of your business in advance of their departure. Next, ask them how well you’re meeting those expectations, and implement changes that will keep them on board. Best to ask before they go, but if it’s too late and they’re gone, ask anyway.

I recently wrapped up a project for a business services company to help them uncover reasons for a fairly high customer defection rate. They knew a few of their small business customers had ceased operations when the economy took a nosedive. But they wondered what else might be wrong.

We pulled a list of customers that had left during the last year and undertook to interview as many of them as we could. We offered to make a generous donation to a nationwide health organization in the name of each business that granted us a 10-minute interview. Some contacts just weren’t reachable after multiple calls, so we sent out a survey to those.

Nearly 25% of the former customers did participate in an interview, and over 8% responded to the online survey. The results were both predictable and surprising, in turns. They had anticipated that some customers were upset by a price increase that occurred when the recession started. But they hadn’t realized that their one-size-fits-all bundle of services really didn’t work for everyone. Patterns emerged, and profiles of several different types of offerings that customers wanted became evident.

Better than finding out why they’ve gone, take active steps now to understand your customers’ expectations while they are still with you.

• Set up a social media-monitoring tool to alert you if people are posting comments about your business online. Identify someone in your organization to track and respond promptly to both positive and negative comments.
• Invite key decision-makers to a customer advisory board meeting. If possible, bring in an independent facilitator, and hold the meeting to a preset agenda that is relevant to the attendees.
• Encourage product management and marketing people to meet with a few different customers semi-annually to discuss how they are using what you offer, what they like, and what’s missing.
• Conduct a survey to determine what is important to your customers. Ask someone who is not so close to your business to help you frame the questions. Provide respondents the option to give more detailed, off-script comments.
• When you gain insight into what you can do to be a better partner to your customers, make it happen.

If you did this last year, that’s good! Now, it’s time to do it again. Customers’ needs change. Just remember, it may “cost you five times more” if you don’t keep taking their temperature.

Mary Sullivan is a co-founder of KickStart Alliance, a team of marketing and sales consultants to B2B technology companies, including clean tech. Mary started her career in tech in sales and later moved to product management and product marketing, bringing her affinity for the customer with her. Increasingly, her focus is on online and social marketing and the value of the content that can enrich businesses’ relationships with their customers.