Costco Case Study: Employee Passion Increases Employee Retention and Customer Engagement

The top ten companies in PeopleMetrics' 2009 Most Engaged Customers report are an elite group. Their customers are more engaged than their competitors'. This means that they do more than simply provide a service—they provide a positive emotional experience that customers return for time and time again. Given that PeopleMetrics has proved a connection between Customer Engagement and a company's overall financial health, these companies are role models for long-term business success. In the 2009 study, Costco earned the #10 slot.

Costco’s industry-leading Customer Engagement rates can be attributed the fact that the warehouse retailer successfully and consistently provides an exceptional shopping experience for Costco customers, who return not only for Costco’s retail deals, but also because they feel emotionally connected to the brand. As a recent Business Wire article on the MEC report stated, “creating a superior retail experience is based on the ability to forge an emotional connection between the customer and the employee… customers report more positive shopping experiences if the employee they interacted with made the shopping experience fun and went above and beyond to meet their needs.”

In other words, the customer’s emotional experience is crucial, and often matters even more than factors like price, location, or other functional benefits. Just how does Costco foster emotionally satisfying retail experiences? They begin with their employees. As PeopleMetrics’ Executive Vice President, Kate Feather, pointed out in the article mentioned above, “The key for retailers is to ensure they’re fostering an emotional connection between their employees and customers. To do this you must start with employees. If retailers take care of their employees, employees will take care of their customers.”

In his book The Must-Have Customer, Robert Gordman compares employee relations at Costco and its biggest competitor, Sam’s Club. He writes, “When Costco finds the right people, they pay them 35 percent more than Sam’s. And 82 percent of Costco employees are covered by the company’s health plan, versus only 47 percent at Sam’s. Not surprisingly, Costco beats Sam’s on every measure of productivity and has a turnover rate that’s less than a third of Sam’s.”

Recent lawsuits notwithstanding, Costco is well known for fostering highly engaged employees who passionately advocate for the brand. From higher pay to fun store-opening competitions for employees, Costco understands that positive customer experiences begin with positive employee experiences.

~Monica Nolan, Account Manager