This report examines how a customer’s business relationship with a company as a whole may be influenced by personal contact with an employee. It is based on the study, “The Employee or the Company: The Relative Importance of People Versus the Company Brand on the Customer Experience,” by Dr. Frank Mulhern, Academic Director of the Forum for People Performance Management and Measurement.

Dr. Mulhern is associate dean of research at Northwestern University’s Medill School and specializes in researching the role of employees in marketing strategy.

When Business Was Indeed “Personal”

Long before Internet commerce and “big box” retailers came to the retail scene, commercial transactions involved personal relationships between buyers and sellers. Merchants such as mom-and-pop grocers, tailors and shoemakers knew their customers personally. Buyers and sellers enjoyed ongoing interpersonal connectivity that spanned their personal and business lives.

The rise of modern business brought with it a de-personalization 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 report addresses the distinction between business-as-brand and business-as-people. It evaluates, from

the consumer’s perspective, the relative importance of people versus the corporate brand in a service marketing context. The study explores the idea that consumers may be more interested in personal relationships than the corporate brand.

The Role of People in Service Relationships

In the book, “A Brave New Service Strategy” by Barbara Gutek and Theresa Welsh a distinction is made between service 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 years has been far more about data and software systems than the most important element of relationships – people.

While research has identified business characteristics and attributes that establish a strong bond with the customer, at the heart of these relationships is “treating customers as valued individuals” (Bhatty, Skinkle and Spalding 2001). Ultimately, it’s employees who can

A white paper from the Forum conducted at the Medill School at Northwestern University

improve customer satisfaction in their roles as the living brand of the organization, and display strong, positive interaction with potential and established customers.

No matter the type of business, employee perceptions, attitudes, and behaviors are central to the customer’s experience with a company. Poor customer service, then, is one of the chief shortcomings that undermine a company’s brand and reputation. In one example, during the early 2000s, The Home Depot, in a cost-cutting move, terminated many of its full-time home improvement experts/ sales people and hired in their place less experienced, part-time staff. During that time period, customer service and sales plummeted, and the value of Home Depot stock slipped 8 percent while its rival Lowe’s saw its stock price climb 180 percent. Acknowledging its mistake, Home Depot reinstated many of those full-time positions, and sales ultimately recovered.

Insurance Industry as a Model for Service IndustriesThe Forum’s study focused on the personal insurance industry (life, health, auto and property insurers). However, the experiences discovered through the course of the research and the findings themselves are central to many service industries including health care, financial services, education, as well as smaller personal services, such as home repair.

The insurance industry in the U.S. is highly fragmented, and comprised of more than 100 brands, with few of those brands reaching top-of-mind (first recall) awareness, according to a study by Branding Strategy Insider. In addition, the emotional connection to insurance brands is very low, with premium prices / rates one of the top differentiating considerations, suggesting that the category is commodity-like for many consumers. The very nature of buying insurance may be viewed as a rather negative “must-do” task by the consumer since he usually doesn’t see an immediate benefit to the purchase.

The buyer’s interactions with the company – carried out through a personal connection to an agent – then become very important in how the company is viewed overall. This is where insurance companies have an opportunity to set themselves apart from their competition in order to grow and succeed. Having a network of knowledgeable, helpful and trustworthy sales agents is crucial to customer satisfaction and financial success.

How the Research UnfoldedThe insurance industry is an excellent arena for investigating the role of front line personnel in the customer experience because insurance is a significant high-involvement purchase that can result in long-term, customer-to-company relationships. Meanwhile, the insurance industry is struggling with whether to maintain networks of independent sales agents versus selling through their own sales force. Direct selling allows for lower premiums (no sales commission payments required), but eliminates the opportunity for the personal relationships between the company and the customers.

The analysis performed matched the engagement levels of individual sales agents for a national insurance company, to the ratings customers gave to the agents and to the company overall. A key element of the analysis is that the customer perception metrics are aggregated by sales agents, allowing for precise assessment of the relationships between sales agent engagement metrics and customer perceptions.

Data collected for the research consists of three major components. They are:

1.Customer Satisfaction Survey: The insurance company conducted a customer satisfaction survey, administered online, that included questions about the quality of the experience with the sales agent and the quality of the experience with the company overall.

2. Employee Engagement Survey: All sales agents were asked to complete an employee engagement survey administered online as part of a series of administrative tasks agents are required to conduct online.

3. Employee Performance: A limited set of individual performance standards were used to measure customer retention rates and the change in the number of outstanding insurance accounts over time.

Results – Experiences with Agent versus Company

In the customer satisfaction survey, customers were asked to rate their overall experience with the sales agent and, separately, their overall experience with the company on a scale ranging from “extremely positive” to “extremely negative.” The mean rating for the agents was significantly higher than the mean rating for the company. This result shows that on average customers rate their agents higher than they rate the company with respect to the quality of their experience.

Evaluation of the scores on an agent-by-agent basis shows that over 90 percent of the agents scored higher on customer satisfaction with the agent than with the company itself.

There are a number of possible reasons why a customer would rate an agent higher or lower than the company overall. Customers interact with agents differently than they do with the company. When purchasing an insurance product, filing a claim or any other transaction with an agent, customers have a personal interaction with the agent either in the agent’s office or the customer’s home, or by phone. In contrast, customer interaction with the company is limited to a website visit or contact with a customer call center, whose representatives are likely to be different each time a customer phones.

It’s interesting to note the differences in the types of advertising used by an insurance company compared with its agents. The company advertisements are generally expensive (network TV and magazines) but impersonal. However, the agent ads generally appear in local newspapers and weekly “shopper” publications,

usually with a photo of the agent. Agents earn additional goodwill through community involvement such as board memberships and sponsorships.

The key implication is that the agent is the “public face” of the company, and plays a positive, measurable role in the customer experience.

The Engaged, High-Performing Agent

Research results from the employee engagement survey and employee performance standards showed that the customers’ rating of the agent is closely associated with the performance of the agent.

The study found that the agents in the top quartile in terms of both engagement and customer satisfaction had significantly higher levels of account growth and customer retention. In other words, when an employee had a strong relationship with the company, and the customer similarly had a strong relationship with the employee, the organization realized the greatest performance results. This represents a very large effect and underscores that the best performance is achieved by both having highly engaged employees and satisfied customers. It also shows that focusing on employee engagement is not enough. Performance improves the most when a high level of employee engagement is paired with a high quality customer experience.

What It Means for Business and Steps for Improvement

A key conclusion of the insurance study, as it applies to other service-oriented businesses, is that customers build relationships with individual employees more than a corporate brand. This suggests that when a company has a strong, positive brand reputation, it may have more to gain by investing in its employees than in investing more in the company’s reputation.

Investments in employees could include sales and product information training, meaningful incentives and rewards, career development, extension of benefits, and improved compensation.

Interestingly, a Mintel Comperemedia online survey of 275 insurance agents found that a majority of agents (63

A key conclusion of the insurance study, as it applies to other service-oriented businesses, is that customers build relationships with

individual employees more than a corporate brand.

Forum for People Performance Management & Measurement1601 N. Bond Street, Suite 303 • Naperville, IL 60563

630.369.7780 • www.performanceforum.org

The Forum for People Performance Management and Measurement (www.performanceforum.org) is a research center within the Medill Integrated Marketing Communications (IMC) graduate program at Northwestern University. A central objective of the Forum is to develop and disseminate knowledge about communications, motivation and management so that businesses can better design, implement and manage people-based initiatives for inside and outside an organization.

percent) prefer web-based sales and product training that allow them to learn in their offices, while continuing to serve customers and build their businesses. This suggests that insurers should recognize the preference and provide agents with support and incentives that simplify their efforts, rather than distracting them from their core goals.

It also suggests that all companies should look for creative and sensible ways to engage employees in an effort to enhance the joint employee-customer experience.

Companies that truly care about their employees and customers and constantly change their products and services to meet changing consumer needs will succeed at the expense of companies that are purely sales driven. This represents a true people-first approach to business.

To view the full text of the research paper, please visit the Forum website at: www.performanceforum.org/research

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