27

A report
On
Service Profit Chain
Submitted To:
Ms.Nausheen Rahman
Associate Professor,
Department of Finance,
Universit of Dha!a.
Submitted ":

#roup No: $%
Section & A
".".A '(
th

"atch
Department of Finance
Universit of Dha!a.
)ourse name: Princip*es of Mar!etin+
)ourse code: F,-$.
Date of Submission: April 13, 2011
27
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A Combined effort of
A Combined effort of
8Asma Afia Shetu16-115
8Asma Afia Shetu16-115
7ohamma! "abin #slam16-013
7ohamma! "abin #slam16-013
6ohamma! ar$an16-261
6ohamma! ar$an16-261
5%aioba #slam16-251
5%aioba #slam16-251
1S&& 'a(rul #slam16-107
1S&& 'a(rul #slam16-107
2!&Abu Dau!16-0))
2!&Abu Dau!16-0))
SL. NoNameRollRemark
SL. NoNameRollRemark
3!& ilan *ossain16-01)
3!& ilan *ossain16-01)
+Shahana( ,ar-in16-117
+Shahana( ,ar-in16-117
)!& Sano.ar *ossain16-175
)!& Sano.ar *ossain16-175
10!& ahbubur "ahman15-255
10!& ahbubur "ahman15-255
11Ariful *ossain15-0)5
11Ariful *ossain15-0)5
27
Apri* '/, -$''

Ms.Nausheen Rahman
Associate Professor,
Department of Finance,
Universit of Dha!a.
Sub0ect: Submission of report on Service Profit Chain.
Dear teacher,
1ere is the report that 2e have prepared as per our +uide*ines. This report focuses on Service
Profit Chain
To ma!e the stud as i**ustrated as possib*e, effort is devoted to a de+ree, as ou instructed. As
ou 2i** +o throu+h the case stud ou 2i** find ho2 Strate+, po*icies 3 p*annin+ premises p*a
a si+nificant ro*e in practica* fie*d.
4our su++estions re+ardin+ this report 2i** be hi+h* appreciated. 5e sha** be avai*ab*e for an
6uestions, corrections and chan+es if re6uired.
Sincere*,
S.M. Na7ru* 8s*am
9n beha*f of the members of #roup,$%
Section, A
""A '(
th
"atch
Department of Finance
Facu*t of "usiness Studies
Universit of Dha!a
LETTER OF TRANS!TTAL
LETTER OF TRANS!TTAL
27
8t is a +reat honor for us to submit this report to our respected teacher Ms. Nausheen Rahman,
Associate Professor, Department of Finance. At first 2e 2ant to conve our than!s and +ratitude
to her for assi+nin+ us this report entit*ed, :Service Profit Chain.
8t 2ou*d not have been possib*e for us to comp*ete the report, but for the he*p of our respectab*e
teacher Ms. Nausheen Rahman.
So, a** the peop*e concerned as 2e** as our +roup members are 2orth of pure comp*iment.
Ac"no#$e%&ement'
Ac"no#$e%&ement'
27
No. Particu$ars Pa&e No.
(. 8ntroduction )
*. 9ri+in of the stud )
+. 9b0ectives of the stud )
,. 8mportance of the stud )
-. Methodo*o+ .
/. ;imitations of the stud .
). ;iterature revie2 (0
(0. Findin+s +1
((. )onc*usion +1
(*. Supp*ementar part +/
(+. "ib*io+raph +)
Tab$e of contents
Tab$e of contents
<=ecutive summar
<=ecutive summar
27
The Service , Profit )hain 2hich estab*ishes the *in!s bet2een profitabi*it and interna* service
6ua*it. 8n this stud, 2e can easi* identif that customer *oa*t drives profitabi*it and +ro2th>
customer satisfaction drives *oa*t> va*ue drives customer satisfaction emp*oee productivit
drives va*ue> emp*oee *oa*t drives productivit> emp*oee satisfaction drives *oa*t and
interna* 6ua*it drives emp*oee satisfaction. 8n a 2ord , 2e can dec*are that this service,profit
chain form the bac!bone of service successes .5e have a*so tried to sho2 some famous artic*es
b distin+uish 2riters 2here authors a*so provided a service,profit chain audit 2hich 2ou*d he*p
companies determine the necessar actions to the firms? *on+ term profitabi*it.
8n this report 2e have tried to sho2 the importance, ob0ectives and a*so the ori+ination of this
report. #oin+ throu+h this entire report, one can find the *iterature revie2 about service profit
chain and some 2or! re*ated prob*ems. At the *ast part of this report, 2e have tried to sho2 some
findin+s +athered b ourse*ves b preparin+ this report.
27
Reports Preliminary:
(Introductory Part)
Reports Preliminary:
(Introductory Part)
!ntro%uctor2 part
!ntro%uctor2 part
27
%he ser-i/e-profit /hain establishes relationships bet.een profitabilit0, /ustomer lo0alt0, an!
emplo0ee satisfa/tion, lo0alt0, an! pro!u/ti-it0& %he lin1s in the /hain 2.hi/h shoul! be
re3ar!e! as propositions4 are as follo.s: ,rofit an! 3ro.th are stimulate! primaril0 b0 /ustomer
lo0alt0& 5o0alt0 is a !ire/t result of /ustomer satisfa/tion& Satisfa/tion is lar3el0 influen/e! b0
the -alue of ser-i/es pro-i!e! to /ustomers& 6alue is /reate! b0 satisfie!, lo0al, an! pro!u/ti-e
emplo0ees& 7mplo0ee satisfa/tion, in turn, results primaril0 from hi3h-8ualit0 support ser-i/es
an! poli/ies that enable emplo0ees to !eli-er results to /ustomer&
Ori&in of the stu%2'
This report is prepared for Nausheen Rahman, )ourse teacher of Principles of Marketing (F-
204)@ Facu*t of "usiness Studies at Universit of Dha!a as a partia* re6uirement of the course.
9ur course instructor has assi+ned to the students of the department of Finance, ""A '(
th
batch,
to ma!e report on Service Profit Chain. This report is prepared durin+ the '
st
semester, -
nd
4ear and 2ou*d be submitted in the same semester. The standard procedure for the *on+, forma*
report is fo**o2ed here as part of the instruction of the course instructor.
For severa* causes, service profit chain p*as a vita* ro*e in the or+ani7ation.
)reatin+ the +reater service va*ue :
.
Origin Of the study
Origin Of the study
Importance of this report

Importance of this report

27
Importance of Service Profit Chain:

Increasing Customer loyalty
5o0al /ustomers are more li1el0 to tell others about their lo0alt0 than $ust satisfie! /ustomers&
79/ite! /ustomers tell other people about their e9perien/es an! /reate ambassa!ors for the
/ompan0& %he0 be/ome lo0al /ustomers an! the0 1eep returnin3&
Increasing Customer satisfaction
A satisfie! /ustomer is not automati/all0 a lo0al /ustomer& #t:s onl0 the super satisfie! /ustomers
.ho be/ome lo0al& %hat is .h0 ;satisfie!: is not enou3h in a .orl! of abun!an/e .hi/h is the
situation for man0 /ompanies to!a0& %he e9pe/tations of the /ustomer /han3e all the time&
Ser-i/e profit /hain helps the /ompan0 to maintain the lo0alt0&

Increased Product ivy of employees
6alue is a !ire/t result from pro!u/ti-e emplo0ees& #n this /ase -alue has to !o .ith the
emplo0ee:s abilit0 to a/t on the .ishes an! nee!s of the /ustomers an! fin! solutions that .or1
.ithin the frame.or1 of the /ompan0& ,ro!u/ti-e emplo0ees also ha-e a hi3h !e3ree of pro!u/t
1no.le!3e an! /ustomer 1no.le!3e& %his is .h0 emplo0ees .ho ha-e ser-e! 8uite a fe. 0ears
in the /ompan0 usuall0 are mu/h more pro!u/ti-e than ne. emplo0ees&
Increasing Employee loyalty
7mplo0ee lo0alt0 is !ri-en b0 enthusiasm an! satisfa/tion& %o be able to /reate e9/ite!
/ustomers an! /ontribute to memorable e9perien/es 0ou nee! to be e9/ite! as an emplo0ee as
.ell& %his implies that the emplo0ees must be happ0 .ith their $obs to ha-e .hat it ta1es to meet
the /ustomer in this .a0& #n this /ase lo0al refers to /onsi!erate emplo0ees .ho sta0 lon3 in the
/ompan0 an! ha-e 3reat 1no.le!3e of both /ustomers, pro/esses an! the /ulture .ithin the
/ompan0&

Improving Internal quality
%he su//ess !epen!s on /ulti-atin3 not $ust a pro!u/ti-e emplo0ee base, but a /ohesi-e team of
in!i-i!uals .ho share 0our passion for the business&#nternal 8ualit0 ensures the emplo0ee:s
moti-ation& #t:s important to un!erline that moti-ation has to !o .ith both $ob /onte9t an! $ob
/ontent& %he $ob /onte9t is the e9ternal /on!itions su/h as frin3e benefits an! .a3es& *o.e-er,
27
Ob3ectives of the stu%2'
The ain o!"ectives of this report are state# !elo$%
To ac6uire !no2*ed+e ho2 to create +reater service va*ue for the customers.
To ac6uire !no2*ed+e ho2 to bui*d the re*ationship of service,profit chain
To ac6uire !no2*ed+e ho2 to provide the ma=imum satisfaction 3 productive service for
emp*oees.
To ac6uire !no2*ed+e ho2 to find out the satisfied 3 *oa* customers.
To ac6uire !no2*ed+e ho2 to find out the hea*th service profits 3 +ro2th.

The tpe of methods used in this report is main* of a descriptive nature. 9n* secondar data
ana*sis 2as se*ected as the basic research method. And most of data co**ected from the different
artic*es on the service profit chain.
<ver stud has some *imitations. 5e faced some usua* constraints durin+ the comp*etion of our
report. The ma0or *imitations are:
;ac! of e=perience: ;ac! of e=perience acted as constraints in the 2a of meticu*ous
e=p*oration on the topic.
8nsufficient data: The data re6uired for sufficient ana*sis for 2ritin+ report cou*dn?t be
co**ected due to the e=cessive 2or!*oad.
Time constraints: Time constraints have confined us to prepare this report short*. Thou+h
time is *imited but 2e have tried to +ive our best effort to prepare this report in the proper
2a.
Objectives of this report
Objectives of this report
ethodology
ethodology
!imitations of the study
!imitations of the study
27
Literature Revie#
Literature Revie#
27
What is Service-Profit Chain?
The service-profit chain is a powerful phenomenon that stresses the importance of
people both employees and customers and how linking them can leverage
corporate performance. The service-profit chain is an equation that establishes the
relationship between corporate policies, employee satisfaction, value creation,
customer loyalty, and profitability.
Why Service-Profit Chain?
#t is estimate! that t.o-thir!s of /ustomers .ho !efe/t !o so be/ause of poor ser-i/e& #n or!er
for /ustomer ser-i/e to !ri-e profits, e-er0 lin1 in 0our ser-i/e-profit /hain < emplo0ee
/apabilit0, $ob satisfa/tion, pro!u/ti-it0, emplo0ee lo0alt0 an! /ustomer satisfa/tion < must be
stron3&
Building Sustainable Profit Growth
Delivering top quality service must be brought to the top of your company's needs
hierarchy as one can draw a straight line between superior service and your
sustainable profit growth. To achieve success, you must make superior service
second nature of your organiation.
Seamless Integration of the SPC Lins
! seamless integration of all components in the service-profit chain employee
satisfaction, value creation, customer satisfaction, customer loyalty, and profit and
growth links all the critical dynamics of top customer service. "The company guides,
nurtures, and empowers its employees, and the employees play a vital role in securing
customer satisfaction and the benefits that accrue from it."
Be the Best Possible
Be a !Go-giver! in customer service" #t's no secret that every organisation of
value in today's world economy, is focused on customer service. The future
belongs to those individuals and businesses that service their customers in a
superior fashion. To get ahead, organisations must know who their customers are
and what they e$pect. They must deliver more. The same applies to you as a
member of the organisation. To get ahead in your current and future
employment, you must first know who you customers are %e.g., your team leader&
and what their e$pectations of you are. 'ou must then deliver more than those
e$pectations.
Customers for Life
The purpose of a business is to create and keep a customer. #f a business
successfully creates and keeps customers in a cost-effective way, it will make a profit
while continuing to survive and thrive. #f, for any reason, a business fails to attract or
sustain a sufficient number of customers, it will e$perience losse
27
The relationship of Service-Profit Chain
b0 ar/us =u/1in3ham, Doll0 >hu3h, ?ohn @abarro, et al&
%he ser-i/e-profit /hain establishes relationships bet.een profitabilit0, /ustomer lo0alt0, an!
emplo0ee satisfa/tion, lo0alt0, an! pro!u/ti-it0& %he lin1s in the /hain 2.hi/h shoul! be
re3ar!e! as propositions4 are as follo.s: ,rofit an! 3ro.th are stimulate! primaril0 b0 /ustomer
lo0alt0& 5o0alt0 is a !ire/t result of /ustomer satisfa/tion& Satisfa/tion is lar3el0 influen/e! b0
the -alue of ser-i/es pro-i!e! to /ustomers& 6alue is /reate! b0 satisfie!, lo0al, an! pro!u/ti-e
emplo0ees& 7mplo0ee satisfa/tion, in turn, results primaril0 from hi3h-8ualit0 support ser-i/es
an! poli/ies that enable emplo0ees to !eli-er results to /ustomers& 2See the e9hibit A%he 5in1s in
the Ser-i/e-,rofit >hain&B4
27
%he ser-i/e-profit /hain is also !efine! b0 a spe/ial 1in! of lea!ership& >7Cs of e9emplar0
ser-i/e /ompanies emphasi(e the importan/e of ea/h emplo0ee an! /ustomer& Dor these >7Cs,
the fo/us on /ustomers an! emplo0ees is no empt0 slo3an tailore! to an annual mana3ement
meetin3& Dor e9ample, *erbert Eelleher, >7C of South.est Airlines, /an be foun! aboar!
airplanes, on tarma/s, an! in terminals, intera/tin3 .ith emplo0ees an! /ustomers& Eelleher
belie-es that hirin3 emplo0ees .ho ha-e the ri3ht attitu!e is so important that the hirin3 pro/ess
ta1es on a Apatina of spiritualit0&B #n a!!ition, he belie-es that Aan0one .ho loo1s at thin3s
solel0 in terms of fa/tors that /an easil0 be 8uantifie! is missin3 the heart of business, .hi/h is
people&B Filliam ,ollar!, the /hairman of Ser-i/easter, /ontinuall0 un!ers/ores the
importan/e of Atea/her-learnerB mana3ers, .ho ha-e .hat he /alls Aa ser-ant:s heart&B An! ?ohn
/>o0, >7C of =an/ Cne, stresses the Aun/ommon partnership,B a s0stem of support that
pro-i!es ma9imum latitu!e to in!i-i!ual ban1 presi!ents .hile suppl0in3 information s0stems
an! /ommon measurements of /ustomer satisfa/tion an! finan/ial measures&
&
27
Ana*7in+ Part
27
Analysis:
A ser-i/e-profit /hain anal0sis helps /ompanies !etermine .hat !ri-es their profit an! su33ests
a/tions that /an lea! to lon3-term profitabilit0&%he ser-i/e-profit /hain establishes relationships
bet.een profitabilit0, /ustomer lo0alt0, an! emplo0ee satisfa/tion, lo0alt0, an! pro!u/ti-it0&
5earnin3 from our /lass room G 3oin3 throu3h the boo1s .e ha-e 3aine! !ifferent t0pes of
theoreti/al 1no.le!3e about ser-i/e profit /hain& Fe ha-e also trie! to 3ather 1no.le!3e about
ser-i/e profit /hain b0 stu!0in3 !ifferent arti/le on ser-i/e profit /hain& %hese 1no.le!3e
/ontainsHHHHH&
Details definition about service profit chain
Effects of service profit chain on the organization
Functions of service profit chain
Model about service profit chain
Real application in the organization
& Fe ha-e 3athere! e9perien/e that ser-i/e profit /hain is mainl0 fo/us onHHHH&
7, I 7mplo0ee pro!u/ti-it0

6 I Ser-i/e -alue
>S I >ustomer satisfa/tion
>5 I >ustomer lo0alt0
, I ,rofit J@ro.th
27
Findin+s Part
27
'o.-a-!a0s, ser-i/e profit /hain pla0s a -ital role in the or3ani(ation& Fhile preparin3
this report, .e ha-e trie! to fin! out some reasons behin! this& =0 as1in3 un!er these 8uestions
G 3i-in3 the appropriate ans.ers .e ha-e trie! to sho. that the importan/e of ser-i/e profit
/hain for the or3ani(ation&
(rofit and )rowth
1& How do we define loyal customers ?
>ustomers often be/ome more profitable o-ertime& An! lo0al /ustomers a//ount for an
unusuall0 hi3h proportion of the sales an! profit 3ro.th of su//essful ser-i/e pro-i!ers& #n some
or3ani(ations, lo0alt0 is measure! in terms of .hether or not a /ustomer is on the /ompan0 rolls&
=ut se-eral /ompanies ha-e foun! that their most lo0al /ustomers the top 20K of total
/ustomers-not onl0 pro-i!e all the profit but also /o-er losses in/urre! in !ealin3 .ith less lo0al
/ustomers &=e/ause of the lin1 bet.een lo0al /ustomers an! profit&
2. Do measurements of customer profitability include
profits from referrals L
>ompanies that measure the stream of re-enue an! profits from lo0al /ustomers 2retention4 an!
repeat sales often o-erloo1 .hat /an be the most importantof the three "s of lo0alt0: referrals&
3& hat proportion of business development e!penditures
and incent lives are directed to the retention
of e!isting customers
%oo man0 /ompanies /on/entrate nearl0 all their efforts on attra/tin3 ne. /ustomers& =ut in
businesses li1e life insuran/e, a ne. poli/0 hol!er !oesnMt be/ome profitable for at least three
0ears& #n the /re!it-/ar! finan/e business, the brea1-e-en point for a ne. /ustomer is often si9 or
more 0ears be/ause of hi3h-mar1etin3 an! ba!-!ebt /osts in the first 0ear of a relationship .ith
/ar!hol!ers& %hese /osts must be !efra0e! b0 profits from lo0al /ustomers, su33estin3 the nee!
for a /areful !i-ision of or3ani(ational effort bet.een /ustomer retention an! !e-elopment&
". hy do our customers defect L
#tMs important to fin! out not onl0 .here !efe/tors 3o hut also .h0 the0 !efe/t& Fas it be/ause of
poor ser-i/e, pri/e, or -alueL Ans.ers to these 8uestions pro-i!e information ahout .hether or
not e9istin3 strate3ies are .or1in3& #n a!!ition, e9it inter-ie.s of /ustomers /an ha-e real sales
impa/t& Dor e9ample, at one /re!it-/ar! ser-i/e or3ani(ation, a phone /all to 8uestion /ar!hol!ers
.ho ha! stoppe! usin3 their /ar!s le! to the imme!iate rein statement of one-thir! of the
!efe/tors&
27
*ustomer +atisfaction
5& #re customer satisfaction data gathered in an
ob$ective% consistent% and periodic fashion L

>urrentl0, the .ea1est measurements bein3 use! b0 the /ompanies .e ha-e stu!ie! /on/ern
/ustomer satisfa/tion& At some /ompanies, hi3h le-els of reporte! /ustomer satisfa/tion are
/ontra!i/te! b0 /ontinuin3 !e/lines in sales an! profits& Npon /loser obser-ation, .e !is/o-ere!
that the satisfa/tion !ata
6& here are the battening posts for obtaining customer
feedbac& in your organization L
5istenin3 posts are tools for /olle/tin3 !ata from /ustomers an! s0stemati/all0 translatin3 those
!ata into information in or!er to impro-e ser-i/e an! pro!u/ts& >ommon e9amples are letters of
/omplaint &Still more important listenin3 posts are reports from fiel! sales an! ser-i/e personnel
or the lo3s of telephone ser-i/e representati-es&
7& How is information concerning customer satisfaction
used to solve customer problems L
#n or!er to han!le /ustomer problems, ser-i/e pro-i!ers must ha-e the latitu!e to resol-e an0
situation promptl0& #n a!!ition, information re3ar!in3 a /ustomer /on/ern must be transmitte! to
the ser-i/e pro-i!er 8ui/1l0& >ustomers an! emplo0ees must be en/oura3e! to report rather than
suppress /on/erns& Dor e9ample, one =oston-area 5e9us !ealer notifie! its /ustomers, O#f 0ou are
e9perien/in3 a problem .ith 0our /ar or our ser-i/e !epartment an! 0ou /anMt ans.er
M100Ksatisfie!M .hen 0ou re/ei-e 0our sur-e0 !ire/tl0 from 5e9us, please 3i-e us the
opportunit0 to /orre/t the problem before 0ou fill out the sur-e0& 5e9us ta1es its /ustomer
sur-e0s -er0 seriousl0&O
,$ternal +ervice -alue
8& How do you measure service valued
6alue is a fun/tion not onl0 of /osts to the /ustomer but also of the results a/hie-e! for the
/ustomer& 6alue is al.a0s relati-e be/ause it is base! both on per/eptions of the .a0 a ser-i/e is
!eli-ere! an! on initial /ustomer e9pe/tations& %0pi/all0, a /ompan0 measures -alue usin3 the
reasons e9presse! b0 /ustomers for hi3h or lo. satisfa/tion &=e/ause -alue -aries .ith
in!i-i!ual e9pe/tations ,efforts to impro-e -alue ine-itabl0 re8uire ser-i/e or3ani(ations to mo-e
all le-els of mana3ement /loser to the /ustomer an! 3i-e frontline ser-i/e emplo0ees the latitu!e
to /ustomi(e a stan!ar! ser-i/e to in!i-i!ual nee!s&
27
,mployee (roductivity
'. How do you measure employee productivity L
#n man0 ser-i/es, the ultimate measure of 8ualit0 ma0 be /ustomer satisfa/tion& %hat measure
shoul! be /ombine! .ith measures of 8uantit0 to !etermine the total output of the ser-i/e
or3ani(ation
,mployee .oyalty
(). How do you create employee loyalty L
7mplo0ee lo0alt0 3oes ban! in ban! .ith pro!u/ti-it0, /ontra!i/tin3 the /on-entional .is!om
the at su//essful ser-i/e pro-i!ers shoul! be promote! to lar3er super-isor0 responsibilities or
mo-e! to a similar $ob in a lar3er business unit&
27
)onc*usion:
27
Supp$ementar2 part
27
Appen!i9 parts: Di-e arti/les on the ser-i/e profit /hain
#n 1))+ the *ar-ar! =usiness "e-ie. 2*="4 publishe! a seminal paper entitle! O,uttin3 the
Ser-i/e-,rofit >hain to For1O& %he authors brou3ht to3ether t.o fa/ts mana3ers ha! 1no.n
intuiti-el0 for 0ears: 214 satisfie!, lo0al /ustomers !ri-e business 3ro.th an! profitabilit0, an!
224 satisfie!, lo0al emplo0ees are more pro!u/ti-e an! !eli-er better /ustomer ser-i/e&
%he ser-i/e-profit /hain stresses the importan/e of people - both emplo0ees an! /ustomers -
an! ho. lin1in3 them /an le-era3e /orporate performan/e&
%his /ir/ular relationship bet.een emplo0ees, /ustomers an! sharehol!ers /ontribute! to the
.ell 1no.n SearMs mo!el in the mi!-)0: a 5K in/rease in emplo0ee attitu!e lea!s to a 1&3K
in/rease in /ustomer satisfa/tion .hi/h lea!s to a 0&5K in/rease in re-enue 3ro.th& 5e! b0
>7C Arthur artine(, a 3roup of more than 100 top le-el Sears e9e/uti-es spent the better
part of three 0ears rebuil!in3 the /ompan0 aroun! its /ustomers an! in the pro/ess /han3e! its
/ulture& %he /ompan0 tra/1e! su//ess from mana3ement beha-iour throu3h emplo0ee
attitu!es to /ustomer satisfa/tion an! finan/ial performan/e&
%he ser-i/e profit /hain mo!el of business performan/e 2*es1ett, Sasser, G S/hlesin3er, 1))74
ena/ts relationships bet.een profitabilit0, /ustomer lo0alt0, an! emplo0ee satisfa/tion,
lo0alt0, an! pro!u/ti-it0& %he /ausalit0 effe/t of har! -alues an! soft measures be/ause the
intan3ible Msoft -aluesM of emplo0ee en3a3ement per/eptions metri/s atten! .ith the left brain,
tan3ible, har! -alue metri/s of business performan/e&
#n or!er to 1eep them profitable .e nee! to mana3e all the lin1s, both si!es of the /oins an!
not onl0 fo/us on 8ualit0 pro/ess mana3ement su/h as lean, si9-si3ma for e9ample&

#n a subse8uent reprint *=" arti/le - ,uttin3 the Ser-i/e-,rofit >hain to For1 2?ul0-Au3ust
20084 the authors !es/ribe the lin1s in the /hain are as follo.s: *+op line profit and growth
are stimulated primarily by customer loyalty. ,oyalty is a direct result of customer
satisfaction. -atisfaction is largely influenced by the value of services provided to customers.
.alue is created by satisfied% loyal% and productive employees. Employee satisfaction% in turn%
results primarily from high/0uality support services and policies that enable employees to
deliver results to customers*.
%he @allup Cr3anisation states that /ompanies .ith en3a3e! staff ha-e 38K hi3her /ustomer
satisfa/tion, 22K hi3her pro!u/ti-it0 an! up to 27K hi3her profits&
%he >orporate 5ea!ership >oun/il states that en3a3e! emplo0ees perform 20K better an! are
87Kless li1el0 to lea-e their or3anisation&
Dr& Daniel Denison, of #D =usiness S/hool in 5ausanne, has been /on!u/tin3 resear/h to
pro-e the lin1 bet.een Cr3anisational >ulture an! bottom-line performan/e metri/s sin/e the
earl0 80Ms an! all his resear/h in!i/ates that to!a0Ms /ulture affe/ts tomorro.Ms performan/e &
2Denison1)8+PDenison1))04&
27
%hese stu!ies !emonstrate that Cr3anisational >ulture has not onl0 a short-term impa/t on
performan/e but lastin3 effe/ts as a /ompetiti-e e!3e in the .or1 en-ironment&
Dor e9ample, the turnaroun! of #= un!er 5ouis 6& @erstnerMs lea!ership is /onsi!ere! to be
one of the most remar1able turnaroun!s in /orporate histor0 - un!er @erstner, #=Ms ne.
strate30 .as to use pro/esses an! /ulture to re3ain a!-anta3e&
O%he /ustomer is al.a0s ri3htQO is a .ell-.orn motto& *o.e-er e8ual effort must be ma!e in
human resour/e mana3ement a/ti-ities su/h as e9e/uti-e /oa/hin3 an! lea!ership
!e-elopment as mu/h as relationship mar1etin3, ultimatel0 !eli-erin3 impro-e! sharehol!er
returns& De.er than 1 in + emplo0ees 223K4 in the NE an! #relan! are full0 en3a3e! an!
nearl0 as man0 -- 22K -- are a/tuall0 !isen3a3e! 2=lessin3 Fhite 20084 - so which side of the
coin are we missing in the equation?

%he 1e0 lin1 here is the /orrelation bet.een emplo0ee en3a3ement an! /orporate performan/e
be/ause it is essentiall0 one of our s/ientifi/ approa/hes to or3anisational anal0sis& %he impa/t
of or3ani(ational /ulture on /orporate performan/e is one of Rener3ieMs core /ompeten/ies
27
Ser-i/e-,rofit >hain o!el
=02*es1ettetal,20004
27
Puttin& the Service4Profit Chain to 5or"
Ee0 i!eas from the *ar-ar! =usiness "e-ie. arti/le b0 ?ames 5& *es1ett, %homas C& ?ones,
@ar0 F& 5o-eman, F& 7arl Sasser, ?r&, 5eonar! A& S/hlesin3er
The !%ea in 6rief
Fhat !ri-es 3ro.th an! profitabilit0 in a ser-i/e businessL *i3hl0 satisfie! /ustomers& An! to
1eep those /ustomers profitable, 0ou nee! to mana3e all the aspe/ts of 0our operation that affe/t
/ustomer satisfa/tion--.hat the authors /all the service-profit chain&
*ereMs ho. the ser-i/e-profit /hain .or1s: 7mplo0ee satisfa/tion soars .hen 0ou enhan/e
internal service 0uality 2e8uippin3 emplo0ees .ith the s1ills an! po.er to ser-e /ustomers4&
7mplo0ee satisfa/tion in turn fuels employee loyalty, .hi/h raises employee productivity& *i3her
pro!u/ti-it0 means 3reater e!ternal service value for /ustomers--.hi/h enhan/es customer
satisfaction an! loyalty& A mere 5K $ump in /ustomer lo0alt0 /an boost profits 25K-85K&
%o ma9imi(e 0our profits, stren3then all the lin1s in 0our ser-i/e-profit /hain& Dor e9ample, fast-
foo! 3iant %a/o =ell foun! that its stores .ith lo. .or1for/e turno-er 2a 1e0 mar1er of
emplo0ee lo0alt04 en$o0e! !ouble the sales an! 55K hi3her profits than stores .ith hi3h
turno-er& %o boost profitabilit0 a/ross stores, it enhan/e! internal ser-i/e 8ualit0--for instan/e,
b0 3i-in3 emplo0ees more latitu!e for on-the-$ob !e/ision ma1in3&
27
The !%ea in Practice
To optimi7e 2our profitabi$it28 the authors recommen% these practices'
9n%erstan% the Lin"s in the Service4Profit Chain
Startin& #ith interna$ service :ua$it28 each $in" in the service4profit chain can %irect$2 stren&then44
or #ea"en44the ne;t'
27
easure44an% ana&e44the Re$ationships in <our Service4Profit Chain
%o enhan/e profitabilit0, measure the relationships bet.een lin1s in 0our /ompan0Ms ser-i/e-
profit /hain& %hen fashion strate3ies for stren3thenin3 them&%o assess the relationship bet.een
internal service quality an! employee satisfaction,
%a/o =ell:
14 onitors internal service quality throu3h a net.or1 of 800 numbers /reate! to ans.er
emplo0eesM 8uestions, fiel! their /omplaints, reme!0 situations, an! alert top-le-el mana3ement
to potential trouble spots&
24 >on!u/ts perio!i/ emplo0ee roun!table meetin3s, inter-ie.s, an! /ompan0.i!e sur-e0s to
measure employee satisfaction& %he results of this .or1 prompte! %a/o =ell to !esi3n an
emplo0ee satisfa/tion pro3ram that features a ne. sele/tion pro/ess, impro-e! s1ill buil!in3,
an! automation of unpleasant Oba/1 roomO labor
27
"ibliography:
"ibliography: