The Employee or the Company: The Relative Importance of People versus the Company Brand on the Customer Experience

Frank MulhernNorthwestern University

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The Employee or the Company: The Relative Importance of People versus the Company Brand on the Customer Experience

Introduction

Prior to the era of modern business, commercial transactions involved personal relationships between buyers and sellers. Merchants such as mom-and-pop grocers, clothing tailors, and shoe cobblers knew their customers personally. Buyers and sellers enjoyed ongoing interpersonal connectivity that spanned their personal and commercial lives. The rise of modern business brought on a depersonalization of retail commerce as large corporations supplanted small enterprises. As a surrogate for personal relationships, and what they embody including trust, authenticity and personality, corporations turned to branding. Brands, largely through non-personal media communications, fill in the gap created when business transactions take place between customers and large, de-personalized businesses.

This study addresses the distinction between business-as-brand and business-as-people. We explore the simple questions, “From the customer’s perspective, what is the relative importance of a person versus a brand in a business relationship?”

The Rise of Brands

We’ve been living in the era of the brand. While brands have long been a staple of business performance, they received an increase in focus beginning in the late 1980s when the idea of brand equity took center stage. Since then, more books, articles, conferences and seminars about branding have taken place than just about any other topic in business.

Branding directs emphasis toward communications through media, as opposed to through people. Brand marketers advocate spending enormous sums of money producing ads and buying media – the mainstay of revenue generation for the advertising agencies and media companies. Today some of that brand-centered media marketing is beginning to fade as we move toward mass customization and so called “personalized” communications. Brands will always remain important. However, as technology enables greater addressability of communications and interactivity becomes mainstreamed, we may see a return to the pre-modern business world where personal relationships matter more than brand images.

In this study we evaluate, from the consumer’s perspective, the relative importance of people versus the corporate brand in a service marketing context. Our main premise is that consumers are more interested in personal relationships with service providers than the corporate brand. We conduct an empirical study in the insurance industry, however, the idea that a personal relationship between a buyer and seller is central to many service industries including health care, financial

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services, education as well as smaller personal services such as home repair or hair styling. Consider a hypothetical example of the latter. If a woman has a preferred hair stylist leave a salon to work at a competing salon with a comparable location and price, it’s likely that the customer will switch salons to maintain the relationship with the hair stylist. In such a case, the personal relationship trumps the salon brand. The loyalty is with the person, not the brand. The same sort of loyalty is likely to exist with other service providers such as doctors, real estate brokers, and corporate sales agents

In this study we empirically analyze customer feelings towards a sales person and towards a company (equivalent to the brand in service marketing) to determine the relative importance of the two to the customer. We do so by analyzing survey data on the quality of customer experience with a large regional insurance company thatuses sales agents to sell and service insurance products.

We also explore how the level of engagement of employees relates to how customers rate the sales agent as well as the company. In addition, we investigate how customer ratings and employee engagement relate to two quantitative measures of sales agent performance.

The Role of People in Service Relationships

In their book, “The Brave New Service Strategy,” Gutek and Welsh (2000) make a distinction between encounters and relationships. A key aspect of that distinction is that relationships matter most when they involve personal connectivity. Oddly, the popular focus on relationship marketing over the past two decades has been far more about data and software systems than the most important element of relationships – people.

In some ways, the distinction between brands and people is not a distinct one. Depending on the degree of interaction between customers and employees, the extent to which the employee is intertwined with the brand in the customer’s mind varies. Many companies undertake efforts to align employees with their brand values (Cerullo and Goldberg 2006), resulting is closer connectivity between employees and the overall brand. Employee perceptions, attitudes and behaviors are central to the customer’s experience with the company (Rucci, Kirn and Quinn 1998). One example of this is Orange, a mobile telephone company in the UK, which ensures the customer experience reinforces its brand values in specific ways that include honesty, customer identification, and the provision of unique offerings to individual customers (Harris 2007).

Bhatty, Skinkle and Spalding (2001) identified several business characteristics and attributes that establish a strong bond with the customer and lead to the desired loyalty behaviors. These include staff attitude, the delivery of advertised promises, favorable return policies, accurate product information and treating customers as valued individuals. This final aspect, “treating customers as valued individuals,” lies

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at the heart of our central premise that people may be more important than brands in service marketing contexts.

In service marketing, people play a central role in performance (Frolovicheva 2006). Employees in people-centered businesses create short-term value directly for customers without the intermediary step of creating an intangible asset, as in the cases of brands and corporate reputation (Barber and Strack 2005). As such, organizations need to understand the extent to which interpersonal relationship between employees and customers influence the customer experience.

Methodology

We investigate the relative importance of employees and the company brand in an empirical analysis of an insurance company sales force and their customers. The insurance industry is an excellent arena for investigating the role of front line personnel in the customer experience because 1) insurance is a major, high-involvement purchase that results in long-term customer to company relationships, 2) the insurance industry is struggling with whether to maintain networks of sales agents versus selling direct. Direct selling allows for lower premiums but eliminates the opportunity for the development of personal relationships between the company and the customers.

The analysis we perform matches the engagement levels of individual sales agents to the ratings the customers give to the agents and to the company overall. A key element of the analysis is that the customer perception metrics are nested by sales agents, allowing us to precisely assess the relationships between sales agent engagement metrics and customer perceptions.

We are also able to connect customer perceptions and employee engagement to objective measures of employee performance. Previous research has linked employee engagement to performance. Here, we go beyond employee engagement to incorporate customer perceptions into an analysis of how employee engagement and performance are linked. This allows us to understand the nature of the relationship between engagement and performance and the role of the customer in that relationship. Doing so will allow us to assess the degree to which customer perceptions add to, or perhaps subtract from, the link between employee engagement and performance.

Data

Our empirical analysis involves studying the field sales personnel for a national insurance company. The company sells a full range of retail insurance products including life, health, property, and automobile. The products are exclusively sold through company sales agents and the agents only sell products for one company. Our data consists of the following components:

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1. Customer Satisfaction Survey: The insurance company conducted a customer satisfaction survey that included questions about the quality of theexperience with the sales agent and the quality of the experience with the company overall. The survey was administered online through the company’s web site. Customers were invited to take the survey through an e-mail solicitation. Customer perceptions were aggregated by sales agents allowing us to evaluate how the customers feel about their sales agent.

2. Employee Engagement Survey: All sales agents were asked to complete an employee engagement survey administered online. The engagement survey was tied to other administrative tasks agents are required to conduct online, yielding a total of over 2400 participating agents.

3. Employee Performance: A limited set of individual performance metrics for sales agents was made available to us. For confidentiality purposes, explicit measures of sales levels by agent were not provided. However, we are able to assess certain metrics of customer retention and change in the number of accounts active from one year to the next.

The employee and customer surveys were conducted in the winter of 2008. The agent performance data represents calendar year 2007.

Results

Experiences with Agent versus Company

We first consider customer perceptions of the sales agents and the company brand. Customers were asked to rate their overall experience with the sales agent and, separately, their overall experience with the company on a ten-point scale ranging from “extremely positive” to “extremely negative.” As is typical with such a rating scale, respondents primarily utilized the upper end of the scale. The mean rating for the company is 8.35, while the mean rating for the agents is 8.96. This difference of a bit more than half of a scale point (0.61) is statistically significant. This result shows that on average customers rate their agents higher than they rate the company.

Next we explore responses to these two questions on an agent-by-agent basis. Results show that for 93.4% of the agents, the mean rating for the agent exceeded the mean rating for the company. This is a powerful result as it reveals that fewer than seven percent of the agents had a mean rating lower than the mean rating for the company. One can think of a multitude of possible reasons why a customer would rate an agent higher or lower than the company overall. Customers interact with agents (new account purchases, filing a claim, etc.) and the company (customer service call, web site visit, price change, etc.) in fundamentally different ways. While the relationship with the agent is a personal relationship – taking place either on the phone, in the agent’s office or customer’s home, the relationship customers have with the company is more impersonal as exemplified by media advertisements,

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direct mail solicitations, bills in the mail, and visits to the web site. The most personal connection is to the company call center and likely to feature a different customer service agent each time a customer calls. The key implication is that the agent plays a positive, measureable role in the customer experience.

We can evaluate the relationship between the customers rating of the agent and the customer’s rating of the company. We find that these two measures are correlated, with a correlation coefficient of 0.70 on a scale ranging from zero to one. Interestingly, this may not be as high as one might expect given that the customer’s primary experience with the company is through the agent. An argument might be made that since the agent represents the company, customer perceptions of the agent and of the company should be about the same. With a correlation of only 0.70, it appears that many customers make a clear distinction between how they feel about the agent and how they feel about the company. As we saw above, this distinction is one in which 93% of the agents are perceived more favorably than the company. We can infer that this is likely attributable to the personal relationship the customers have with the agent, relative to the anonymous and more distant relationship with the company.

Agent Engagement

We next consider the role of employee engagement. One of the main reasons organizations want to have engaged employees is the expectation that more highly engaged employees lead to more satisfied customers, and better performance. We consider the prospect that higher levels of agent engagement results in higher customer ratings for the company and agents. Essentially, we are investigating the proposition that highly engaged agents have more satisfied customers; and because customers are more satisfied, they are more likely to stay with the company and potentially make additional purchases.

We consider the correlation between the engagement metric and the customer ratings of overall experience with the agent and the overall experience with the company. The correlation between the agent engagement value and the average customer rating of the company by that agent’s customers is not statistically significant. Similarly, the correlation between the agent engagement value and average customer rating of the agent by that agent’s customers is not significant. Our ability to test this relationship is weakened by the fact that we do not have data on individual customer ratings of the company and the agent, only averages for the customers of each agent. Having customer-level data aggregated up to the total of all customers of each agent limits out ability to precisely calibrate the relationships with correlation coefficients.

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Agent Performance

We have two measures of agent performance. One is customer retention – the percent of customers that each agent retains from one year to the next. The other is account growth rate – the percent change in the number of accounts an agent has outstanding. Note that an account represents one insurance product maintained by one customer. Therefore the change in number of accounts is a composite measure made up of the insurance products purchased (or cancelled) by existing customers as well as insurance products gained or lost from new customers acquired or existing customers lost.

Given that our central focus is on the relative importance of the sales agent and the company brand to customers, we conducted a regression analysis to determine the relative impact of the customer experience with the agent and experience with the company have on the two agent performance measures.

Table 2 shows the outcome of the regression models. The models calibrate the impact of independent, or causal, variables on a dependent variable. There are two models; one with retention as the dependent variable and one with account growth as the dependent variable. There are four independent variables in each model –tenure, customer rating of the agent, customer rating of the company, and agent engagement. We include the variable tenure, the number of years the agent has worked for this company, because length of service can influence performance in a variety of ways such as selling skills, personal relationships with customers, etc.

Table 2: Impact of Customer Experience with the Agent and the Company on Customer Retention and Account Growth

Independent Variable

Retention Account Growth

Std. Coef. t-value Std Coef. t-valueTenure 0.533* 30.37 -0.232* 11.49Rating of Company

-0.028 1.21 0.005

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Rating of Agent 0.104* 4.49 0.077* 2.99Agent Engagement 0.008 0.47 0.062* 3.06R2 .295 .259

* Statistically significant at .05 or better

In the table, “Std. Coef.” represents the standardized regression coefficients which indicate the influence of the independent variables on the dependent variable. Higher coefficients (in absolute value) indicate stronger relationships. Positive coefficients represent direct relationships while negative coefficients represent inverse relationships. The 0.533 for the tenure variable indicates that tenure is the

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most important influence on customer retention (because 0.533 is larger than the coefficients for the other variables). Tenure has a strong positive impact on customer retention. The asterisks show the variables that have a statistically significant impact on the dependent variables. For the model representing the elements that drive retention (see the “retention” column), tenure and rating of the agent are significant drivers of customer retention. Note the coefficients for the rating of the company and agent engagement are not significant.

We can see the results for the account growth model in the column labeled “account growth”). As with the retention model, tenure and rating of the agent are significant predictors. The table also shows that agent engagement is a significant predictor of account growth. The size of the agent engagement coefficient (0.062) is nearly the same as the size of the coefficient for the customer’s rating of the agent (0.077). Thus both agent engagement and the customer’s rating of the agent have about the same impact on account growth. The interplay of agent engagement and the customer rating of the agent is an important consideration which we take up in the next section.

One last observation for the account growth model is that the tenure coefficient is negative, indicating that agents with longer tenure have lower growth in number of accounts – a finding that might indicate more aggressive selling by younger or newer agents.

With respect to our central premise about the relative importance of the agent and the company, the results in Table 2 show that the customers’ rating of the agent directly influences the performance of the agent, while the customers’ rating of the company does not. Stated another way, the results tell us that the better the customers’ experience with the agent, the better the agent performs (in terms of retention and account growth). On the other hand, there is no relationship between the customer’s rating of the company and the agent’s performance. Conclusion – the customer’s experience with the agent is more important than the customer’s experience with the brand in driving performance, or stated differently, the person is more important than the brand.

When Agent Engagement Matters

As shown above, agent engagement is positively associated with the growth in outstanding accounts from year to year for a particular agent. This leads us to the question, “When does engagement matter?” To investigate this, we take a closer look at the agents that performed best in terms of the agent engagement score and the customer ratings of the agents. Table 3 shows the results of an analysis of the agents that appear in the top quartile (25%) for the agent engagement measure and/or the customer rating of the experience with the agent.

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Table 3: Top Quartiles for Agent Engagement and/or Customer Rating of Agent: Impact on Account Growth and Retention

Top Quartile for…. Account Growth

Retention

Agent Engagement but NOT Customer Rating of Agent 2.0% 85.5%Customer Rating of Agent but NOT Agent Engagement 2.1% 83.3%BOTH Agent Engagement and Customer Rating of Agent 4.0% 85.7%NEITHER Agent Engagement not Customer Rating of Agent 0.7% 86.0%

First we note that being in the top quartile for either of these measures has little to do with customer retention, which varies within a very small range. On the other hand, account growth varies dramatically across the four conditions. As a benchmark, we see that agents who are not in the top quartile for either engagement or customer rating have an account growth rate of only 0.7%. When an agent rates in the top quartile for one of these measures, but not the other, the growth rate is around two percent. However, agents that are in the top quartile for both measures experienced a much higher growth rate of 4.0%. This result has a very important interpretation regarding how employee engagement affects performance.

Agents scoring high on engagement perform substantially better than agents with low engagement (2.0% versus 0.7%). However, when high agent engagement is combined with high customer evaluation of the agent, the growth rate jumps to 4%. This is a very large effect and it shows that the best performance is achieved by both having highly engaged employees and satisfied customers. A key take-away is that focusing on employee engagement is not enough. Performance improves the most when engagement is paired with a high quality customer experience.

Conclusions

This study provides several important conclusions about the role of employees in the customer’s relationships with a company. Our key results can be summarized as follows:

1. When asked to evaluate both their sales agent and their insurance company, customers overwhelmingly rate the sales agent higher than the company.

2. Agent performance, as measured by increases in outstanding accounts, is significantly affected by how the customers rate the agent, but not how the customers rate the company.

3. The best performing agents are those that score highly on both agent engagement and customers rating of the agent.

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The implications of this analysis are clear. Customers build relationships with individual employees more than a company brand. The insurance sales agents play a measureable role in the customer experience, and that role translates into better performance for the agent and the company. On the other hand, the agent’s rating of the overall company has no effect on the performance of the agent. This result suggests that companies have more to gain by investing in sales agents than in building the brand. (Such a conclusion assumes that the brand already has a strong, positive presence in the market.) Investments in agents could include sales training, meaningful incentives and rewards, career development, extension of benefits and improved compensation.

Agents perform better when they are more engaged, and even better, when their customers are highly satisfied with the agent. As noted, agents in the top quartile for agent engagement and customer rating of the agent achieve over four times the account growth of agents not in the top quartile for either measure. This result deserves important consideration given the extensive emphasis that has been placed on employee engagement over the past several years. Unfortunately, much of the research on employee engagement has not incorporated customer metrics into the same analysis. The inclusion of customers into the employee engagement picture provides a richer understanding of how engagement relates to performance. While high levels of employee engagement do relate to better performance, the impact is fully doubled when a high level of customer satisfaction is in place. The key take-away is that organizations do better by focusing on employees and agents rather than just employees (as often done by Human Resources) or customers (as often done by Marketing). In fact, our research points toward the value in simultaneously evaluating, and supporting, the joint employee-customer experience. Doing so would represent a true people-first approach to business.

Works Cited

Barber, Felix and Strack, Rainer (2005) “The Surprising Economics of a People Business,” Harvard Business Review, Vol. 83, 6, p. 80-90.

Bhatty, Mukarram; Skinkle, Rob and Spalding, Thomas. (2001) “Redefining customer loyalty, the customer’s way,” Ivey Business Journal,65.,3., p. 13-17.

Cerullo, Martin and Goldberg, Jason (2006) “The Right Staff,” Brand Strategy June, p. 56.

Frolovicheva, Katerina (2006) “The Emergence of Service Science: Towards Systematic Service Innovations to Accelerate the Coproduction of Value,” Journal of Global Business and Technology,. 2, p. 39-55.

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Gutek, Barbara A. and Theresa Welsh (2000) The Brave New Service Strategy: Aligning Customer Relationships, Market Strategies ad Business Structures,, New York: AMACOM.

Harris, Patrick (2007) “We the People: The Importance of Employees in the Process of Building Customer Experience,” Brand Management, 15, p. 102-114.

Rucci, Anthony, Kirn, Steven and Quinn, Richard T. (1998) “The Employee-Customer-Profit Chain at Sears,” Harvard Business Review, 76, 1, p. 82-97.