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Service Profit ChainRelationship between:• Employee satisfaction and loyalty will lead to• Productivity, which will lead to• Customer satisfaction and loyalty, leading to• Profitability, bring it back around to employee satisfaction and loyaltyThe idea that profit and growth are stimulated primarily by customer loyalty is a fundamental proposition• 5% increase in customer loyalty can lead to an increase in profits from 25-85% Retaining customers for one year will increase a firm’s bottom lineLoyalty is a direct result of customer satisfactionValue = results + process quality in relation to the total cost to the customer• Result = coffee• Process quality = how it was made, the environment, and employees• Cost: dollar amount and cost to accessEmployee capability and productivity deliver value to targeted customersTop Box Customers spend the most money and give the best advice to firmsLatitude within limits gives employees empowerment to correct unsatisfied customersEmployee loyalty drive productivity, which lowers turnover percentage, impacting recruiting and trainingQuality of work drives employee satisfaction and loyalty through incentives and job trainingIf customers believe that value is delivered in relation to cost, long-term profits will be yielded Develop a working environment with:• Highly capable, engaged employees• Interacting with customers• Creating customer value superior than competitionBottom Line Results•• Customer loyalty• Customer buys more• Tells others• Customer suggestionsThe Four R’s•• Retention• Related sales• Referrals• Research and developmentCareer Tidbit: The Three Wells• Read well, speak well, and write wellNever communicate when you’re angry, especially through email, notes, letters, verbal communication, and non-verbal communicationJoe Wheeler• CEO of the service profit chain institute• Boston based consulting firmChapter 1Rackspace: IT hosting services• Carefully selects its customers based on specific criteria• Provides easy access to customer-centered teams• Personalized, fast responses• Listens to and acts on reaction and suggestionsRackspace results• High customer satisfaction and loyalty• High referral rates• Low marketing costs• High annual business growth from 2003 to 2007Customers act like they own the company, creating customer owners• Shared values that do not include financial gain or interest• Share desired outcomes with the firm and employee ownersKey Points on customer owner:• Worth more than 100 price-sensitive customers• Generate more money over the customer owners lifetime• Lifetime value of an employee owner who promotes customer ownership is priceless• Organizations that learn how to cultivate ownership attitudes create a self-reinforcing relationship between customers and front line employees• Offer new suggestions to make the firm better and can even help select new employeesEmployee Owner• Won’t leave unless a life changing event occurs• Give ideas and suggestions to better help the firm• Recruit high potential employees that will boost the teamAdvance Service Profit Chain Concept• Retention, customers remain loyal• Who in turn buy more, related sales• Tell others about their experience, referrals• Suggest how to improve, research and developmentCustomers who:• Complain constructively• Suggest new products and services• Process improvementCan enhance their experience and work to align key components to consistently exceed the customers’ expectations Services companies should create strategies, policies, and practices that integrate logic and technology that support frontline employeesSet out to create a core of employees and customer known as ownersOwnership Quotient• Employee ownership quotient must be more than customer ownership quotient Harrah’s Database• Yields are astonishing• Accounts for the spending habits of guests• Shows the amount of customer ownersKoster (GM) found that his supervisors were:• Hung up on “administravia,” they were in the office a lot but had no personal interaction with employees• Not training subordinates or holding people accountableBaptist Health Care• High OQ for both employees and customersCareer Tidbit: Integrity is adherence to moral and ethical philosophiesBuilding the OQ: Harrah’s Owner: no financial interest and shares values with the firm• Return to buy more• Helps with research and development• Tells others about the company, referrals• Give constructive criticism• New suggestions for products or services• Select and refer new employeesTarget employee ownership to be 100%, loyal and contribute ideas and recruit more employeesEmployee ownership drives customer ownership and must be several times higherRETENTION • REFERRAL • RESEARCH&DEVELOPMENT • RELATED SALESOrganic growth: natural growth within the company, not acquisitionHigh OQ differentiates your company from the competitionOwnership Hierarchy• Ownership• Recruiting (apostle)• Commitment• Loyalty• Satisfaction• Trial• Awareness/curiosityBottom is less like a customer owner while top is being a customer ownerHarrah’s uses data mining to view and examine customer trendsKoster evaluated most valuable customers within CRM and reformed arrival and check in procedures for their all expense paid tripsReinforced five service behaviors• Friendly greeting• Smiling / eye contact• Positive attitude• Check for guest satisfaction• Warm farewellRedesigned guest interaction process through a data drive program throughout the hotelMeasure three aspects for employee through surveys using a rational or emotional index, or leadershipHarrah’s established diamond, platinum, and gold customers creating their marketing plan with CRMChapter 2 Build Ownership into your Strategic Value VisionOwnership: return to buy more, retention• Buy related products, related sales• No financial gain related• Refer to others, referrals• Give constructive criticism, research and design• Refer potential new hiresStrategic Value Vision: organization’s process of defining direction• Allocation of capital and resourcesPlan of how to achieve goals:• What do we do• Who do we do it for• How do we do itDeliver differentiated value in the product for the customer, KFC vs. Art&SoulLeveraging customer value over operating incomeOptimize labor and operating expenses through the delivery

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FSU HFT 3240 - Service Profit Chain

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