1 Service Profit Chain Ch. 1 Setting the Record Straight I.A World of Misleading Advice 1.Trade Off between Low Cost and High Quality 2. Service Encounter is King 3. Service Process is Key II. Background of the Trio 1. Heskett: Operations 2. Sasser: Customer Loyalty 3. Schlesinger: Employee Loyalty

2 Service Profit Chain Ch. 1 Setting the Record Straight III. ABP’s Experiences on Employee Loyalty and Customer Loyalty 1.Latitude and Incentive 2. Key Drivers for (Salesperson) Performance IV. Service Profit Chain* 1. Market Share versus Customer Loyalty 2. Four Elements of Customer Value 2. What Difference Does It Make?

3 Figure 1-2 Elements of the Service Profit Chain 1. Employee: Productivity of Output Quality of Output Loyalty Satisfaction Capability 2. Customer Value Equation = Results + Process Quality _______________ Price + Customer Access Costs 3. Customer Satisfaction Customer Loyalty Revenue Growth Profitability

4 Service Profit Chain Ch. 2 Capitalizing on the Service Profit Chain I.The Service Profit Chain (Figure 2-1) 1. Profit and Growth are Linked to Customer Loyalty 2. Customer Loyalty is Linked to Customer Satisfaction 3. Customer Satisfaction is Linked to Service Value

5 Service Profit Chain Ch. 2 Capitalizing on the Service Profit Chain I.The Service Profit Chain (Figure 2-1) 4. Service Value is Linked to Employee Productivity 5. Employee Productivity is Linked to Employee Loyalty 6. Employee Loyalty is Linked to Employee Satisfaction 7. Employee Satisfaction is Linked to Internal Quality of Work Life

6 Service Profit Chain Ch. 2 Capitalizing on the Service Profit Chain II. Implications of the Service Profit Chain for Management 1.Measuring Across Operating Units 2. Communicating Results of the Self-Appraisal 3. Developing a “Balanced Scorecard” 4. Designing Efforts to Enhance Performance

7 Service Profit Chain Ch. 2 Capitalizing on the Service Profit Chain II. Implications of the Service Profit Chain for Management 5. Tying Recognition and Rewards to Measures 6. Communicating Results 7. Encouraging Internal “Best Practice” Exchange