Understanding the Service Profit Chain…
Harvard Business School wrote an article on the service profit chain back in 2008 however the relevance of the article is even more prevalent now post Covid.
Back in the 70s and 80s businesses focused on profit goals in isolation with the work hard ethic driving growth.
Today economics of services consider the factors that drive profitability, investment in people, technology, revamping recruitment practises, training and compensation that is linked to performance or effort not just results.
The shift in thinking means that employees are just as important as customers.
The hard value of profit is now being measured by soft measures, for example the profit of the business can be measured alongside the satisfaction of an employee.
To understand the service profit chain see it as journey as follows:-
- Internal Quality – Drives Employee Satisfaction (working environment, relationships with their colleagues, customers and their role)
- Employee Satisfaction – Drives Loyalty (look after your employees and they will stay)
- Employee Loyalty – Drives Productivity – (retaining employees means no breaks in productivity)
- Employee Productivity – Drives Value – (delivering your service above and beyond)
- Value – Drives Customer Satisfaction – (customers value the result and the services encompassed in the price)
- Customer Satisfaction – Drives Customer Loyalty (a good experience will make you return)
- Customer Loyalty – Drives Profitability and Growth (quality, satisfaction, loyalty, productivity, value as an equation equal profitability)
- Profitability & Growth
The right Leadership underpins the journey and the success of the service profit chain.
The steps form a continuous pattern, and to ensure that you are on top of all the areas involved. You will need to conduct a Service Profit Chain Audit, asking key questions:-
- How do we define loyal customers?
- Do measurements of customer profitability include profits from referrals?
- What proportion of business development expenditures and incentives are directed to the retention of existing customers?
- Why do our customers leave?
- Is customer satisfaction data gathered in an objective, consistent and periodic fashion?
- When are you listening to your customers and when are you getting feedback from your customers and employees?
- How is information concerning customer satisfaction used to solve customer problems?
- How do you measure service value?
- To what extent are measures taken of differences between customers perceptions of quality delivered and their expectations before delivery?
- How do you measure employee productivity?
- How do you create employee loyalty?
- What is the right level of employee retention?
- Is employee satisfaction measured in a similar way to customer satisfaction?
- Employee selection criteria is geared to what customers want as well as Managers?
- How much do you correlate customer satisfaction, quality of service & loyalty to rewarding employees?
- Do employees know who their customers are?
- Are employees satisfied with the technological and personal support they receive?
- Do employees believe they have the right quality of work life?
The measures have to be connected to create a comprehensive picture so that the service profit chain provides a strong foundation for profit and growth.
Please do get in touch for one to one coaching or 90 minute workshops bev@nuggetsoflearning.co.uk
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