OSU study finds link between customer-oriented service and company profitability

Friday, July 9, 2010

By: Leah Kuehn, Spears School communications intern

Oklahoma State University Spears School of Business professors and outside colleagues have proven a definitive link exists between the profitability of service firms and the hiring of employees who are driven to please and satisfy customer needs.

“Although this relationship seems straightforward, it’s a little more complicated than you might expect,” said Tom Brown, OSU professor of marketing and one of the study’s authors.

The study, titled “Employee Customer Orientation in Context: How the Environment Moderates the Influence of Customer Orientation on Performance Outcomes," was co-authored by Spears School marketing faculty Brown, Alex Zablah and John Mowen.  New Mexico Military Institute President Jerry Grizzle and University of Tampa marketing professor James Lee also contributed to the project, which was recently published in the Journal of Applied Psychology.

“The study results revealed that the profitability of service firms is enhanced when they are able to recruit and retain customer service employees who are intrinsically motivated to satisfy customer needs, but only when the service firm itself is characterized by a climate which supports that intrinsic motivation,” Zablah said.   “Likewise, service firms which implement policies and procedures intended to improve customer satisfaction will achieve higher profit levels only when they hire employees who are internally driven to satisfy customers.”

The study began several years ago as an effort to understand when customer-oriented service workers lead to positive outcomes for companies.  Brown said the study examined the “personality variable” of employees, which suggests something innate exists within a person’s psyche making them want to provide service and help others.

“What we hadn’t found prior to the project was a really strong link between this inherent customer orientation and actual worker performance as rated by supervisors,” Brown said.

The colleagues conducted research in 38 sites of a mid-sized casual dining restaurant chain to search for the missing link.

Brown said the company’s employees were unlikely to exhibit high degrees of customer-oriented behaviors if the service climate wasn’t customer-oriented and positive, an atmosphere which varied from site to site.  He said workers embodying customer-oriented behaviors were constrained or stifled if service climate was lacking at the store level, no matter how strongly they possessed those traits.

After unearthing the root problem to their questions, the colleagues went a step further by producing the study’s previously untested, bottom-line finding.

“We were able to go from a service worker and his or her degree of customer orientation and track it all the way through to the profitability of the organization,” Brown said. “Not surprisingly, what we found was that stores with workers performing more customer-oriented behaviors were more profitable.”

Zablah said that while the study’s implications for service organizations are clear, they are more easily said than done.

“Hiring the right people is not enough to improve profitability,” Zablah said.  “Investing in a customer-oriented climate is not enough to improve profitability. Both the right people and the right climate are needed for service firms to benefit from investments aimed at enhancing customer satisfaction and ultimately profitability.”