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Quantifying the link between employee engagement, and customer satisfaction and retention in the car rental industry

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  • Ahmed Khwaja

    (University of Cambridge)

  • Nathan Yang

    (Cornell University)

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.

Suggested Citation

  • Ahmed Khwaja & Nathan Yang, 2022. "Quantifying the link between employee engagement, and customer satisfaction and retention in the car rental industry," Quantitative Marketing and Economics (QME), Springer, vol. 20(3), pages 275-292, September.
    • Handle: RePEc:kap:qmktec:v:20:y:2022:i:3:d:10.1007_s11129-022-09253-6
    DOI: 10.1007/s11129-022-09253-6
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    More about this item

    Keywords

    Employee engagement; Customer satisfaction; Customer retention; Car rental industry; Customer loyalty; Customer relationship management; Retail service marketing;
    All these keywords.

    JEL classification:

    • M31 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Marketing
    • M54 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Labor Management

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