Managing Service Profit Chain

By,

Niranjan Gavali Sagar Kharate Siddhesh Naik Sumit Pophare Pritesh Patil
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Service Profit Chain

The service-profit chain establishes relationships between profitability, customer loyalty, and employee satisfaction, loyalty, and productivity.  The links in the chain (regarded as propositions) are:


Profit and growth are stimulated primarily by customer loyalty. Loyalty is a direct result of customer satisfaction. Satisfaction is largely influenced by the value of services provided to customers. Value is created by satisfied, loyal, and productive employees. Employee satisfaction, in turn, results primarily from high-quality support services and policies that enable employees to deliver results to customers. The service-profit chain is also defined by a special kind of leadership that emphasizes the importance of each employee and customer.
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Harvard University Research

 Theory

and business model evolved by a group of researchers from Harvard University in the nineties.
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James L. Heskett. Thomas Jones. Gary Loveman. W. Earl Sasser. Leonard Schlesinger
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Service Profit Chain

Internal
Operating strategy and service delivery system Loyalty Service concept

External
Target market

Customers
Satisfaction Productivity & Employees Output quality Capability Service quality Customer orientation/quality emphasis Allow decision-making latitude Selection and development Rewards and recognition Information and communication Provide support systems Foster teamwork Quality & productivity improvements yield higher service quality and lower cost Attractive Value Service designed & delivered to meet targeted customers needs Solicit customer feedback Lifetime value Retention Repeat Business Referrals Service value Satisfaction Loyalty

Revenue growth

Profitability

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The Framework
Profitability and Revenue Growth Customer loyalty Customer satisfaction External Service Value Employee retention Employee productivity Employee satisfaction Internal service quality
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Linking the Service-Profit Chain

 Customer  Customer

loyalty drives Profit and Growth satisfaction drives Customer Loyalty

E.g. Xerox found that customers that rated them 5 (on a 1-5 customer satisfaction ranking) were six times more likely to repurchase Xerox equipment versus those at the 4 rating level. Xerox coined the term "apostles" to characterize the customers that rated them a 5. Just as important is to avoid creating terrorists: customers that become so upset the make it a point to speak out about the poor service they received at every opportunity.

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Linking the Service-Profit Chain



Value drives Customer Satisfaction Employee Productivity drives Value Employee Loyalty drives Productivity Employee Satisfaction drives Loyalty Internal Quality drives Employee Satisfaction Leadership Underlies the Chain's Success
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Managing the Service-Profit Chain

Creating and Maintaining Satisfied and Loyal Customers Creating and Maintaining Satisfied and Loyal Employees
LEADERSHIP

EMPLOYEE LOYALTY

INTERNAL SERVICE QUALITY

EMPLOYEE SATISFACTION

EXTERNAL SERVICE VALUE EMPLOYEE PRODUCTIVITY

CUSTOMER SATISFACTION

CUSTOMER LOYALTY PROFIT

Put customers and front-line employees first! Exceed your customers expectations and needs. Know things about your customers that they do not even 8 know about themselves.
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Customer Loyalty


Lifetime revenue of a loyal customer: Dominos pizza eater: Cadillac car owner: Boeing Aircraft Purchaser: $10,000 $500,000 $Billions

A 5% increase in customer retention can increase profits from 25-85%. QUALITY of market share (as measured by loyalty) deserves as much attention as QUANTITY of market share.
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Employee Loyalty


HOW DO YOU CREATE EMPLOYEE LOYALTY?

Compensation. Incentives that reward loyalty. Job satisfaction (including empowerment). Career paths. Hiring that takes into account predictions about loyalty. Carefully evaluate policies that routinely transfer employees. When a employee decides to leave the company, conduct an exit interview. Proper balance between full-time and part-time employees.
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Leadership

 How

Much Time Does Senior Management Spend Personally Developing And Maintaining A Corporate Culture Centered Around Service To Customers And Fellow Employees?

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Southwest Airlines

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Southwest Airlines

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The Steak n Shake Company

 Steak

n Shake Restaurants understands that the interaction between their Associates and their Guests is central to their long term success.  Working with The Service Profit Chain Institute, the management team at Steak n Shake has developed a 5 year plan

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The Steak n Shake Company

 Began

with understanding the economic impact of truly bringing the Service Profit Chain to life.  A comprehensive implementation plan, has been developed.  This program begins with a deep understanding of the guest and associate needs and is followed by a series of initiatives to move Steak n Shake closer to its long term vision.

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I find that when you champion the most noble values-including service, analysis, and database decision making-employees rise to the challenge, and you forever change their lives. -Per Scott Cook, CEO, Intuit Corp.

THANK YOU...!!!

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