Learn how to start application in your business Explore this.
Successful service managers pay attention to the factors that drive profitability and growth: investment in people, technology that supports frontline workers, revamped recruiting and training practices at every level.
Profit and growth are stimulated primarily by customer loyalty. Loyalty is a direct result of high customer satisfaction. Satisfaction is largely influenced by the value of services provided to customers. Value is created by satisfied, loyal and productive employees.
What is the Service Profit Chain?
If you wish to influence the upper level growth and profit you need to look at the bottom level first which is internal quality. In the book, the authors argue how there is this strong and direct relationship between employee satisfaction , customer loyalty and profitability.
In practical terms, you could say that enthusiasm and loyalty signify a very high degree of satisfaction.
But we need to distinguish between the two because they are driven by different factors. You might think that the relationship between loyalty and satisfaction is linear, so that a little more satisfaction results in an equivalent increase in loyalty. Unfortunately, this is not the case at all.
We can best illustrate this by looking at a graph of the relationship between loyalty and satisfaction. From deeply dissatisfied to relatively happy, nothing much happens.
Then, as satisfaction becomes more than just satisfaction and turns into enthusiasm, loyalty increases sharply.
The Service Profit Chain
According to Fred Reichheld REF , there is only one question you need to ask and one number the answer to the question that you need to pay attention to. Only the enthusiastic are counted as promoters. The rest 1 through 6 are in reality answers that correspond to customers who will likely make a negative comment if asked to recommend the service provider.
Now, of all clients surveyed, if we disregard the neutrals and subtract the detractors from the promoters, we arrive at the net-promoter score as a percentage of all customers surveyed.
So if I survey 1, customers, and of them are promoters, detractors and the rest are neutrals or did not respond, I can calculate my NPS as:. Brands such as Apple, Harley Davidson, and Amazon. So the only number you need to watch like a hawk is your net promoter score, how high it is, and — more importantly — whether it is increasing. If it increases, you are doing something right.
If it decreases, you are doing something wrong.
Get Management Tips in your Inbox
End of story. What is the primary need of the customer? Nothing more — nothing less. If I order a party for my family, what is then the primary result? It has to be a memorable experience, and what is a memorable experience?
Putting the Service Profit Chain to Work
It can vary a great deal depending on who the customer is. The obvious consequence of not understanding the needs of the customer is that they might never return. We can achieve the primary result — getting from A to B — in many ways. The difference is the way we do it. In the Value Equation, we call this the Process.
We have to analyze our processes in terms of what creates value for the customer because it almost always increases the expenses. The Ryanair concept aims at minimizing the processes of getting from A to B, leaving the customer with almost nothing but the primary result. Effort is to which degree the customer makes an effort, him or herself, in the service delivery.
If you do your shopping in IKEA, you make a great effort yourself — when you pick up your furniture in the stock or remove your service from the table after your meal. The effort reduces the price.
If you order room service, you make a tiny effort but have to pay some more for that luxury.
Introducing the Service Profit Chain
In this way there are always four variables we can influence in the service concept. Result, Process, Price and Effort.
These four variables together constitute the Value Equation, and all service products are a unique combination of these particular four elements.
The most clever service companies have several value equations operating at the same time — one for each group of customers and situation. Read more on Value.
Careful selection of new recruits. Hire for attitude. Train for skills. Coach for performance and that includes dealing with the bad apples. Best in class training and development at all levels in the organization. Continuous improvement is considered one of the great benefits of the job. Service is not just something the frontline does for our customers.
Putting the Service-Profit Chain to Work
Service is our culture. Employees and managers who do not have customer contact service the employees that do. Our IT department is not the IT-Police — it is an internal service department that supports the frontline in getting the job done. The best service employees take pride in solving the problem on the spot. So the freedom to act is hugely motivating.
In the same way that anyone who has made it to a great sports team knows what is expected of them, employees in the best service organizations also know what is expected of them.
It is part of their motivation to be part of a team that is not afraid to set the bar high. As a result of Steps , we generate not just higher levels of satisfaction, but also real engagement — Service work becomes fun and meaningful.
Service profit chain model pdf
When we need to recruit new team members, our best employees recommend friends and previous colleagues from other organizations because these are the people they would like to work with.
Gradually we become the preferred employer in our region — which means we get the pick of the crop. Anderson,Eugene W. Mittal,Vikas Bowman, Douglas, Narayandas, Das. Heskett,James et al. Heskett,James L.
New York: The Free Press, Kamakura,Wagner et al. Marketing Science , 21 3 , Summer, Journal of Research in Marketing, Vol.
Your Path to Success in Hospitality.