Quantifying the Link Between Employee Engagement, and Customer Satisfaction and Retention in the Car Rental Industry

26 Pages Posted: 8 Aug 2018 Last revised: 9 May 2022

See all articles by Ahmed Khwaja

Ahmed Khwaja

University of Cambridge - Judge Business School; Yale School of Management; Yale University - Cowles Foundation

Nathan Yang

Cornell University; Cornell SC Johnson College of Business

Date Written: May 9, 2022

Abstract

In the retail service industry, employee engagement may play an important role in customer satisfaction and retention, as employees often interact directly with customers. This paper investigates the empirical link between employee engagement and customer satisfaction and retention by analyzing a unique data set from a large car rental company. Our analysis makes use of retirement-induced employee turnover as an exclusion restriction that is plausibly induced by employee age, thereby allowing for variation in employee engagement that is partially exogenous to common underlying factors that also impact customer satisfaction and retention. We show that there is a positive effect of employee engagement on customer satisfaction and retention. Further analysis of moderating effects highlight potential limits to employee engagement, as service disruptions in the form of car downgrades can dampen the positive effects of employee engagement. However, despite the dampened impact of employee engagement its overall effect remains positive indicating that employee engagement can be a key factor in building resilience to unforeseen service disruptions.

Keywords: Employee Engagement, Customer Satisfaction, Customer Retention, Car Rental Industry, Customer Loyalty, Customer Relationship Management, Retail Service Marketing

JEL Classification: M31, M54

Suggested Citation

Khwaja, Ahmed and Yang, Nathan, Quantifying the Link Between Employee Engagement, and Customer Satisfaction and Retention in the Car Rental Industry (May 9, 2022). Available at SSRN: https://ssrn.com/abstract=3213659 or http://dx.doi.org/10.2139/ssrn.3213659

Ahmed Khwaja

University of Cambridge - Judge Business School ( email )

Trumpington Street
Cambridge, CB2 1AG
United Kingdom

Yale School of Management ( email )

135 Prospect Street
P.O. Box 208200
New Haven, CT 06520-8200
United States

Yale University - Cowles Foundation

Box 208281
New Haven, CT 06520-8281
United States

Nathan Yang (Contact Author)

Cornell University ( email )

Dyson School, Warren Hall
360E
Ithaca, NY 14853-6201
United States
6072551590 (Phone)

HOME PAGE: http://dyson.cornell.edu/faculty-research/faculty/ncy6/

Cornell SC Johnson College of Business ( email )

Ithaca, NY 14850
United States

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