PPT5 serviceprofitchain

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Invisible Costs
Internal Adverse effects on: •Employee quality •Employee retention •Wage levels •Training 17 efficiency External Adverse effects on: •Service quality •Customer retention
Costs of employee turn overs
Rreplacing an employee with 5-8 years of experience with one with less than 1 year experience
Automobile sales: $36,000 in sales per month Broker at a security firm: $2.5 Million in commission during the first 5 years.
Profits from price premiums.
7
Why customers become more profitable over time?
8
How does the defection rate influence profitability?
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What influences Customer Loyalty?
Employee Satisfaction
Customer Satisfaction
Customer Loyalty
Profitability retention repeat business referral
workplace design job design employee selection and development employee rewards and recognition tools for serving customers
How to improve employee Satisfaction?
-Work place & system design -Job Design -Recruitment & Selection -Training &Development -Opportunities for advancement -learning opportunities -Employee Reward & Recognition -Empowerment & tools for serving customer
Service Profit Chain
1
What are the key drivers of profitability in service businesses?
What are the most important factor that influences the profitability of a service business?
Costs of High Turnover
Employee Dissatisfaction High Turnover High Costs Visible Costs
•More recruiting •More training •Lower productivity of co-workers and management
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Reading Assignment
“Heskett J. L. Jones, T. O., Lovemen, G. W., Sasser, W. E. & Schlesinger, L. A. Putting the Service Profit Chain to Work, Harvard Business Review, MarchApril 1994, pp 164-174” .
Employee Retention
External Service Value Employee Productivity
Employee Satisfaction
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What are some of the benefits of long term and loyal employees
Long-term employees are knowledgeable about our products, services, and policies and procedures. They have close relationship with customers They are familiar with our customers’ needs and problems. They can help us improve the quality of products or services or the way we serve customers. They are valuable resources for helping other workers do a good job of serving customers and can provide leadership on the front line.
leads to Higher Profits
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How much profit a customer generates over time?
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What are the major factors that contribute to the increase in profit?
Profits derived from the increased purchase Profits from reduced operating costs Profits from referrals to other customers
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What is external service value?
Results produced for the Customer
+
Process Quality
Value =
Price to the Customer
+
Costs of Acquiring the services
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What influence external service value?
What Drives Profitability?
Customer Loyalty
Profitability
3
What are the behaviors of a loyal customer?
3 Rs Customer retention Repeat/Related business Referral
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Internal Service Quality
Employee Satisfaction
The Service Profit Chain (SPC)
Ope rating Strate gy and Serv ice De liv ery Syste m Employee Retention Internal Service Quality External Service Value Employee Productivity Revenue Growth
External Ser
Satisfaction
Customer Loyalty
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WHAT IS VALUE?
Value
= Benefits received by the customer /
Sufferings that the customer has to endure
service concept: results for customers
service designed and delivered to meet targeted customer's needs
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How to use the service profit chain?
Measuring the relationships in the service profit chain across units Communicating results of the self-appraisal resulting from the measurement Developing a “balanced score card” of performance measures Designing efforts to help managers improve service profit chain performance Tying recognition and rewards to established measures Communicating results and encouraging “best practices”
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Why Loyal Customers Matter?
Loyal, Satisfied Customers
often
• • • •
Buy more Pay higher prices Cost less to serve Bring in new customers • Are more satisfying to serve
What are some of the dawbacks of long term employees?
They may have poor qualifications, knowledge and skills They may have a poor attitude towards serving They are slow to learn new things They are afraid of changes They may not be innovative enough Playing politics, bad habits etc