Service Profit Chain

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Managing Service

Profit Chain

By,

Niranjan Gavali13

Sagar Kharate 21

Siddhesh Naik 33

Sumit Pophare 41

Pritesh Patil39

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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.

1. James L. Heskett.

2. Thomas Jones.

3. Gary Loveman.

4. W. Earl Sasser.

5. Leonard Schlesinger

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Service Profit Chain

Internal

Operating strategy andservice delivery system

  Service concept Target market

Servicevalue

Customers

Loyalty

Productivity&

Outputquality

Servicequality

Capability

Satisfaction

Employees Satisfaction Loyalty

Revenuegrowth

External

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 tomeet targetedcustomers’ needsSolicit customerfeedback

Lifetime valueRetentionRepeat BusinessReferrals

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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 loyalty drives Profit and Growth

Customer 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

LEADERSHIP

EMPLOYEE

LOYALTY

INTERNAL EMPLOYEE EXTERNAL CUSTOMER CUSTOMER

SERVICE SATISFACTION SERVICE SATISFACTION LOYALTY PROFIT

QUALITY VALUE

EMPLOYEE

PRODUCTIVITY

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“Put customers and front-line employees first!”

“Exceed your customers’ expectations and needs.

“Know things about your customers that they do not even know about themselves.”

Creating and Maintaining Satisfied and Loyal Customers

Creating and Maintaining Satisfied and Loyal Employees

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Customer Loyalty

Lifetime revenue of a loyal customer:

Domino’s pizza eater: $10,000

Cadillac car owner: $500,000

Boeing Aircraft Purchaser: $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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THANK YOU...!!!

“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.