Services business value chain

The Idea in Brief

What drives growth and profitability in a service business? Highly satisfied customers. And to keep those customers profitable, you need to manage all the aspects of your operation that affect customer satisfaction—what the authors call the service-profit chain.

Here’s how the service-profit chain works: Employee satisfaction soars when you enhance internal service quality (equipping employees with the skills and power to serve customers). Employee satisfaction in turn fuels employee loyalty, which raises employee productivity. Higher productivity means greater external service value for customers—which enhances customer satisfaction and loyalty. A mere 5% jump in customer loyalty can boost profits 25%–85%.

To maximize your profits, strengthen all the links in your service-profit chain. For example, fast-food giant Taco Bell found that its stores with low workforce turnover (a key marker of employee loyalty) enjoyed double the sales and 55% higher profits than stores with high turnover. To boost profitability across stores, it enhanced internal service quality—for instance, by giving employees more latitude for on-the-job decision making.

The Idea in Practice

To optimize your profitability, the authors recommend these practices:

Understand the Links in the Service-Profit Chain

Starting with internal service quality, each link in the service-profit chain can directly strengthen—or weaken—the next:

This link...#...affects this link#ExampleInternal service quality#Employee satisfaction#Financial-services company USAA makes it easier for call-center reps to achieve results for customers by equipping them with state-of-the-art information systems. It also offers more than 200 courses in its employee development program.Employee satisfaction#Employee loyalty#At Southwest Airlines, employee satisfaction levels are so high that at some of its operating locations, turnover rates are lower than 5% per year.Employee loyalty#Employee productivity#An experienced broker who stays with a securities firm for five or more years may account for $2+ million in revenue over several years.Employee productivity#External service value#Thanks to Southwest employees’ unusual productivity (including rapid deplaning and reloading), customer perceptions of service value are very high—even though Southwest doesn’t assign seats or offer meals.External service value#Customer satisfaction#Insurance provider Progressive creates service value for customers by sending teams to the scene of major accidents and providing support services like transportation and housing. By processing and paying claims quickly and reducing policyholder effort, the company enhances customer satisfaction.Customer satisfaction#Customer loyalty#Xerox found that customers who rated their satisfaction level with the company with a “5” (“very satisfied”) on a scale of 1 to 5 were six times as likely to demonstrate loyalty—by repurchasing Xerox equipment—as those who rated their satisfaction level with a “4” (“satisfied”).Customer loyalty#Growth and profitability#By regularly taking steps to improve customer loyalty, Banc One achieved a return on assets more than double that of its competitors.
Jossey-Bass The Health Care Value Chain: Producers, Purchasers, and Providers
Book (Jossey-Bass)
2009-10-07 22:37:01 by Child-In-Time

So much has been said through chain letters and

So much has been said through chain letters and circulars and by word of mouth that misrepresents the intent and purpose of a new law that it is important that the people of the country understand once and for all the actual facts of the case. Such a measure will not destroy legitimate business or wholesome and productive investment. It will not destroy a penny of actual value of those operating properties which holding companies now control and which holding company securities represent in so far as they have any value. On the contrary, it will surround the necessary reorganization of the holding company with safeguards which will in fact protect the investor

2013-09-01 08:14:41 by abendsloth

What are you doing with strangers at that time?

I mean...to be a financial success, you depend on strangers.
No matter what you do for income, you can not do it simply by obtaining money from the same person over and over. Maybe you THINK you get it from the same person because the same boss writes the check. But it wasn't her money - at the start of what they call "the value chain" there are customers who your company/organization is making happy, who voluntarily spend money on your products or services.
Interacting with strangers, and making them into friends/colleagues/business partners, is a requirement for continued success.

2006-02-27 15:39:20 by margueritaville

Book: The World is Flat by Tom Friedman

Ref to the article:
"Globalization & the powerful cross-border labor arbitrage it has spawned has turned the US labor market inside out."
"At the same time, employment & compensation is being squeezed in services as well, where offshore outsourcing is moving rapidly up the value chain...."
"Just five years ago, white collar outsourcing was confined to data processing & call centers;..
"Today, courtesy of IT-enabled connectivity, it has moved to the upper echelons of the knowledge-worker hierarchy -- software programming, engineering, design, doctors, lawyers, accountants, actuaries, business consultants, & financial analysts

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