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Service profit link


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Understanding and managing the Service Profit Link

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Service profit link

  1. 1. Welcome to the World’s First Institute of Customer Experience Management Addressing Business growth and profitability challenges through the science of customer experience
  2. 2. Understanding and managing the Service Profit Link.
  3. 3. What is the objective of the business <ul><li>Creation of Wealth </li></ul><ul><li>For Whom </li></ul><ul><li>Employees? </li></ul><ul><li>Shareholders? </li></ul><ul><li>Customers / Society? </li></ul><ul><li>Ok, let’s agree it is for shareholders. </li></ul>
  4. 4. How is Wealth Created? <ul><li>By transforming the resources </li></ul><ul><li>Men, Money, Technology, Raw Materials </li></ul><ul><li>Into something that customer’s </li></ul><ul><li>“ VALUE” </li></ul>
  5. 5. What is value? <ul><li>Economic Definition: </li></ul><ul><li>Economic Value = Reference Value + Differentiation Value </li></ul><ul><li> (price of best alternative) (difference +ve/-ve with best alternative) </li></ul><ul><li>Consumer Value = Rational + Emotional benefits </li></ul><ul><li> Price </li></ul><ul><li>Summing up: </li></ul><ul><li>The difference between the cost of your product or service and what the consumer is willing to pay . </li></ul>Value is always what is attributed by the customer
  6. 6. Consumer Process Value along 3 dimensions Psychological Dimension Reassurance / Status / Trust/Affection Economic Dimension Price Perception (Cheap, Expensive and Fair) Functional Dimension Features Offered (Relevant /irrelevant) While the bottom two relate to the core product ,the upper dimension mostly comes from services facilitating the core product
  7. 7. Firms Deliver Value Customization Mass customization of products / processes / communication for affinity groups (Consumer experience Life cycle management) Standardization Mass production Mass Advertising Innovation Newer & better product features Innovation / Standardization Staccato Customization Contiguous
  8. 8. What is Customer Experience? <ul><li>A sum total of all interactions a customer has with a company’s: </li></ul><ul><li>People + Process + Products + Phs./VirtualEnvironment </li></ul><ul><li>Products, processes and environment – all driven and leveraged by people </li></ul>Technology used & managed by people Created by people Managed & maintained by people
  9. 9. Service Profit Link
  10. 10. How are People Engaged? <ul><li>Empowerment: adequately facilitated to meet and exceed customer expectations </li></ul><ul><li>Acknowledgement: rewarded and recognized </li></ul><ul><li>Learning: Relevant and timely training inputs </li></ul><ul><li>Fairness: Transparency in policy </li></ul><ul><li> No patronization </li></ul><ul><li> No discrimination </li></ul>
  11. 11. Challenges towards creating an Engaged Workforce <ul><li>Service Quality Gap </li></ul><ul><li>Top Management Mindset </li></ul><ul><li>Silo mindset – micro organization </li></ul>
  12. 12. Service Quality Gap Defined <ul><li>Expected Service vs Perceived Service </li></ul><ul><li>Service Quality Gap </li></ul><ul><li>Mismatch between management perception of expected service </li></ul><ul><li>Translation of management perception of expected service into service standards </li></ul><ul><li>Variance between standards and delivery </li></ul>Word of Mouth Personal Needs Past Experience Sales & Marketing Communication
  13. 13. Remedial Measures <ul><li>Audit of data capture mechanism and nomenclature </li></ul><ul><li>Cross-verification of qualitative inputs and external research </li></ul><ul><li>Process blue printing </li></ul><ul><li>Process fail-safing </li></ul><ul><li>Service recovery procedures </li></ul>
  14. 14. Management Mindset Significance of Customer Experience
  15. 15. Enablers of the Service Profit Chain <ul><li>Hiring of customer centric team members </li></ul><ul><li>Mystery audits of all customer facing processes </li></ul><ul><ul><li>Frontlining </li></ul></ul><ul><ul><li>VoC Forums </li></ul></ul><ul><ul><li>CSaT </li></ul></ul><ul><ul><li>ESaT </li></ul></ul><ul><ul><li>Service TATs </li></ul></ul><ul><li>Escalation Mechanism </li></ul><ul><li>Service guarantees </li></ul><ul><li>Price of non-conformance </li></ul><ul><li>Company Wide CSAT linked bonus </li></ul>
  16. 16. Audit of the Service Profit Chain <ul><li>Net Cost to acquire </li></ul><ul><li>Cost to secure </li></ul><ul><li>Ration of Cos to revenue </li></ul><ul><li>Customer attrition rates </li></ul><ul><li>Portfolio of attrited customers </li></ul><ul><li>Quality of referrals </li></ul><ul><li>AV Lifetime value </li></ul><ul><li>Active to dormant customer ratio </li></ul><ul><li>Nett promoter score </li></ul><ul><li>CSAT score </li></ul><ul><li>Employee attrition rate </li></ul><ul><li>Sales and margin contribution per employee </li></ul><ul><li>ESAT scores </li></ul>
  17. 17. Acknowledgements <ul><li>James Heskett , Earl Sasser & Leonard Schlesinger- Harvard Business School </li></ul><ul><li>Janelle Barlow-TMI America </li></ul><ul><li>Dr. Deepak Jain- Dean-Insead </li></ul><ul><li>Bruce Temkin- Temkin Group </li></ul><ul><li>Dr. Fred Webster Jr.- Tuck School of Business </li></ul>
  18. 18. <ul><li>Let’s begin </li></ul>