Invest in retaining staff to prevent loyal customers defecting when their favourite worker leaves

Rather than spending money on trying to lure new customers, a study by Lester Johnson from Melbourne Business School and Liliana Bove from the University of Melbourne in Australia has found it is more effective to invest in retaining good staff who are well liked by existing customers.

Lester said: "Keep hold of your good staff and you are far more likely to prevent the customers you can't afford to lose, from defecting."

In a people-processing service, such as a hairdressing salon, customer loyalty is either tied to the store or tied to a particular worker. Personal loyalty, which refers to loyalty that's tied to a particular worker, is a strong driver of store or service loyalty.

According to Lester's research, this presents a problem for service managers when employees leave.

He claims on such occasions, even if customers do not immediately defect, their loyalty to the firm may be weakened, making them susceptible to competitive offerings from a new service provider.

Customers who are categorised as ‘true loyals' provide unswerving allegiance to their service provider, continually visiting the store even if better, cheaper or more convenient alternatives become available.

They have a lower search motivation for competitive alternatives and provide favourable word-of-mouth referrals. They are difficult to dissuade from their allegiance and so are more tolerant of minor mistakes or inconsistencies when they occur.

In the hairdressing community, 69% of clients fell into the category of ‘true loyals'.

Only 7% were classified as ‘latent loyals'. ‘Latent loyals' infrequently purchase a given brand so, while they may have an important influence on others, they have little direct personal experience with the brand. They are unlikely to generate strong feelings for or against a brand.

Lester's research suggests these clients found it inconvenient to wait on the availability of their preferred hair stylist or perhaps they found the service too expensive.

A third category of customer, ‘spurious loyals', make repeat purchases, but these repeat purchases might be provoked by convenience or absence of alternatives, rather than a true loyalty to the brand. In Lester's research 9% of customers fell into this group.

Almost 14% of customers were ‘non-loyal' customers. Both the hair-stylist or the salon did not retain them. Reasons cited included dissatisfaction with the hair-stylist and better convenience, location or accessibility elsewhere.

According to Lester, loyal client retention is directly tied to employee retention, which is largely within the control of the service manager or owner.

By contrast, retaining other types of loyal customers depends on the actions of competition and so is more difficult for the manager to influence.

Lester advises firms to identify the mix of customers in their client base, and so identify possible client churn, and to retain good staff. ‘True loyals' visit the salon more regularly and have a positive attitude. To convert a client to a ‘true loyal' you must convert their attitude and ensure it is easy, affordable, convenient and pleasant for them to frequent the salon.

Lester's research was conducted over 18 months using a random sample of 137 Melbourne women over the age of 18 who used a hairdressing service at least once every two months. Half of the ‘true loyal' customers who switched service providers did so because their hair-stylist had left.