Two important components of the serviceprofit chain are empl

Two important components of the service-profit chain are employees and the customer. Discuss your insights into this theory and give examples of how this theory has worked or not worked in a job you have had.

Solution

What is Service-Profit Chain?

According to the service-profit chain model, a connection exists between high profits, customer loyalty and satisfaction and employee productivity and satisfaction. The application of this model first considers profits generated by the loyalty of a customer. Under this model, the customer\'s satisfaction directly impacts the customer\'s loyalty. This satisfaction results from the value the customer receives from the company\'s satisfied and productive employees. Employee satisfaction results from the support of upper management that understands the needs of both the employees and the customers.

Customer Satisfaction Drives Customer Loyalty

Customer satisfaction does not equal customer loyalty. In order to gain customer loyalty, the customer has to perceive value for money spent. The service-profit chain model recognizes that a customer becomes loyal through this perceived value. Since customer expectations constantly change, the organization must recognize and support these changes.

Value

Value means different things to different people. Many individuals associate value with an emotional aspect of the purchase based on experiences. For example, a company can create a well-priced product that has exceptional guarantees. However, a customer might not consider this product valuable enough to become a loyal customer. This is on of the reasons why advertisers use different campaigns for the same product. People respond to stimuli differently based on emotions and experiences.

Employee Productivity Drives Value

The workforce of a company can help to drive the company\'s profits. When an organization has engaged, productive and highly satisfied employees, the organization will have a higher chance of succeeding. Many types of businesses from service businesses to manufacturing businesses sell products to customers. If the business\'s employees have a good working knowledge of the product, the employees have a better ability to service and satisfy customers. Product knowledge comes from both experience and longevity with a company. New employees typically cannot relate to customers as effectively as employees with years of experience working for the company. The service-profit chain model recognizes that employee retention directly impacts customer satisfaction.