Use the Service Profit Chain to Achieve Excellence
There are many websites, rankings, and rating services that list companies that cover the spectrum from poor to great. Striving to be a great performer is a high goal if set with realistic objectives but today we wish to reach for excellence. It is only the excellent companies that can stand out and achieve profitable growth in their industries and they do this by providing excellent service and products to their clients. Look closely and you will see a strong discipline for results among management and a patience for mistakes that fosters innovation. Excellent companies are everywhere and we encounter them daily, we only need to look closely to see what is going on under the hood to realize it. It is these excellent companies that treat customers so well that we instantly know when we have come across the mediocre and the poor performers.
Excellent companies practice and believe in the Service Profit Chain to drive their business results. Originally published in 1994 by James Heskett, et al. in the Harvard Business Review it speaks as true today as it did then. Surprisingly after 14 years there is still management that has not discovered this wisdom. The service-profit chain is a construct that customer loyalty drives profits and growth; Loyalty is a result of customer satisfaction; Satisfaction is the outcome of the value of services provided to the customer; Satisfied, loyal, and productive employees create the value for the customer; Employee satisfaction is the outcome the quality support and policies empowering employees to deliver results to the customer.
Clearly a mouth full let us take another look. Giving employees the tools they need to do their job in the best way possible makes them happy. Happy employees are equipped to provide a high level of service to the customer. The customer finds value in the service delivered by happy employees and is then very satisfied with the purchase of the service. The satisfied customer becomes very loyal to the service which drives repeat business and fuels growth of the company so profits soar!
Really? Prove it? Actually Frederick Reichheld and W. Earl Sasser, Jr. did in their Harvard Business Review article “Zero Defections: Quality Comes to Services.” Their research concluded that raising customer satisfaction a mere 5% can lead to a 100% increase in profit. Why? It is simple. Let’s continue to talk about our local baker who gives a baker’s dozen to each customer but is only charging for the normal twelve. The service being provided today is merely today’s sale. These customers know your service and if they find value in it will be back again for the next sale and the next sale and the next sale. Look at the lifetime value of a customer and then how expensive is give away one extra bagel? How much is the lifetime value of your client worth? The business man that visits our baker and buys a cup of coffee on his way to work for $1.50 today is worth $15,000 over the next 25 years. Should we keep him happy? Of course we should.
Excellent companies understand these critical links between customer satisfaction and profitability and the link between employee satisfaction and customer satisfaction. This is why excellent companies are so successful, they get it. Having high quality employees deliver high quality service to achieve a high level of customer satisfaction, retention, and thus high levels of profits and revenue grow; of course this sounds good but excellent companies actually do it.
” we receive poor customer service because we accept it. I highly doubt the Pep Boys manager on duty Monday recognized that he/she lost a sale due to poor customer service and educated the staff how to do better, but I have hope.