The Service Profit Chain

M S Balaji

Is attitude emphasized? Are job previews utilized? Are customers screened?

Are employees encouraged to refer friends? Are referrals from the best employees given priority?

Careful Employee and Customer Selection (and Self-selection)) Employee Referrals of Potential Job Candidates High-Quality Training

Is training for job and life? Is it an important element of quality of work life?

Is satisfaction measured periodically? Are measurements linked to other functions on the cycle? Satisfied Employees

Cycle of Capability

Well-Designed Support Systems Information Facilities

Do they reflect needs of the service encounter? Are they designed to foster relationships?

Are they linked to service objectives? Are they balanced between monetary and non-monetary?

Appropriate Rewards and Frequent Recognition Clear Limits on, and Expectations of, Employees Do they limit the right risks? Are they logical to employees?

Greater Latitude to Meet Customers Needs

Does it reflect top management talk? Is it enough to allow delivery of results to customers?

Service Profit Chain

Internal
Operating strategy and service delivery system Loyalty Service concept

External
Target market

Customers
Satisfaction

Employees
Capability Service quality

Productivity & Output quality

Revenue growth

Service value

Satisfaction

Loyalty
Profitability

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

Strategic Services Pyramid

Service Profit Chain

Revenue growth and profitability follow from customer loyalty. Customer loyalty follows from customer satisfaction. Customer satisfaction follows from external service value the value the customer receives less the cost incurred in obtaining the service. Productive employees lower costs and ensure satisfied customers. Employee retention and productivity result from employee satisfaction. Satisfied employees result from internal service quality and when they can act on behalf of the customers. Top management leadership underlies chains success

Satisfaction Mirror

More Repeat Purchases Stronger Tendency to Complain about Service Errors

More Familiarity with Customer Needs and Ways of Meeting Them Greater Opportunity for Recovery from Errors

Higher Customer Satisfaction

Lower Costs

Higher Employee Satisfaction

Higher Productivity

Better Results

Improved Quality of Service