Harley-Davidson, Milwaukee, WI - recovered from near bankruptcy in the 1980s by building mutually beneficial relationships with all stakeholders based on simple core values. Returns to investors have averaged 24% (among the best public company records over the past decade), and despite Milwaukee’s tight employment market, a long line of applicants await job openings at Harley. Enterprise Rent-A-Car, St. Louis, MO - raced past Hertz and Avis to become the largest car rental firm in North America. It continues to grow at more than 20% per year in an otherwise sluggish industry. With over 45,000 employees, the company manages to hire more college graduates than any other firm in America by putting the interests of customers and employees ahead of owners. The Vanguard Group, Malvern, PA - the mutual fund industry’s growth leader, whose $550 billion in assets under management was built by putting long-term investment returns to their customers first. With more than 40% of transactions now on the Web, Vanguard maintains the lowest costs and the highest customer retention rates in its industry. Southwest Airlines, Dallas, TX - the only consistently profitable major airline in the U.S. for every one of the past 27 years (since 1973), it has employee turnover rates of 4 to 5%, in an industry where double those rates are typical. In the notoriously cyclical airline business, Southwest has never had a layoff. With the lowest ticket prices, the company still ranks at the top in customer service and safety. Dell Computer, Round Rock, TX - which so effectively utilized the Internet to revolutionize the sales and production of personal computers that it has become the U.S. market share leader. By focusing on building the most valuable customer experience, Dell has made itself the profit leader. Cisco Systems, San Jose, CA - whose employee turnover runs less than 10% although it is headquartered in Silicon Valley where turnover averages 25% to 30%. Not only does every employee carry the company values embossed on an ID badge, but all bonuses are dependent on meeting customer satisfaction goals. Northwestern Mutual, Milwaukee, WI -  the company which has consistently focused on creating superior value for its policyholders. The “Quiet Company” has so successfully parlayed its superior customer retention into lower costs and faster growth that it can no longer be categorized as a high-end niche player; it is the industry leader in individual life insurance. MBNA, Newark, DE - the only credit card company that believes customer retention is so important that it reports the statistic in its annual report. The company retains 97% of its profitable customers. Chick-fil-A, Atlanta, GA - whose store operator turnover runs 5% versus the competition’s 35 to 40%. Founder Truett Cathy has so effectively marshaled loyalty effect economics that he can afford to let his operators earn compensation double or triple industry averages, while still generating sufficient cash to grow the chain and to contribute approximately 10% of profits to charity. SAS, Cary, NC - the leading statistical analysis (e-intelligence) software firm whose 5% turnover rate among software engineers compares with 20%+ for the industry. By hiring the right kind of people and providing them with a career and lifestyle that reinforce work-family balance (employees enjoy free healthcare and child care), SAS is building an institution in a notoriously fickle market space. USAA, San Antonio, TX - whose customer turnover is so low that the primary root cause of defection is death. USAA’s top management believes so strongly in the importance of customer retention that they base their own bonuses on this metric. USAA demonstrates how customer loyalty and employee loyalty go hand in hand; the firm’s telephone staff turnover runs 9% versus more than 20% for the industry. The New York Times, New York, NY - where customer retention is tracked as carefully as profits, and where retention performance (above 90%) stands head and shoulders above the rest of the newspaper competition which churns readers at rates of 25 to 50%. U.S. Marine Corps - the only branch of the U.S. military that has managed to meet its staffing targets - primarily because of superior recruiting and retention success. Rather than dropping standards to meet staffing demand, the Marines constantly raise them. The Corps’ motto, Semper Fideles , helps convey to outsiders the central role that loyalty plays for the Marines. Intuit, Mountain View, CA - the leader in personal financial software, whose employee turnover runs half the Silicon Valley average. Intuit has weathered several storms including a blocked merger with Microsoft and a fundamental shift in its business model from shrink-wrapped software to the Internet by remaining loyal to its founder’s values. To see the featured companies in The Loyalty Effect, click here.
(c) Bain & Company, Inc.