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Understanding and Managing the Service Profit Chain | Aegis Global Academy


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Management Institute in Coimbatore, India offering management development program. Site provides information on courses, admission, student life, faicilities, and placements.

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Understanding and Managing the Service Profit Chain | Aegis Global Academy

  1. 1. World Class “Customer Engagement” Practices comes to your doorstep
  2. 2. Understanding and Managing the Service Profit Chain 2
  3. 3. What is the objective of the business? Creation of Wealth For Whom Employees?  Shareholders?  Customers / Society?Ok, let’s agree it is for shareholders. 3
  4. 4. How is Wealth Created? By transforming the resourcesMen, Money, Technology, Raw Materials Into something that customer’s “VALUE” 4
  5. 5. What is Value?Economic Definition: Economic Value = Reference Value + Differentiation Value (price of best alternative) (difference +ve/-ve with best alternative) Consumer Value = Rational + Emotional benefits Price (Financial + Physical and emotional efforts to acquire and consume products)Summing up: The difference between the cost of your product or service and what the consumer is willing to pay. Value is always what is attributed by the customer 5
  6. 6. How is Value processed by Consumers Psychological Dimension Reassurance / Status / Trust/Affection Functional Dimension Economic Dimension Features Offered Price Perception (Relevant /irrelevant) (Cheap, Expensive and Fair)While the bottom two relate to the core product ,the upper dimension mostly comes from services facilitating the core product 6
  7. 7. How do Firms Deliver Value? CustomizationMass customization of products / processes / communication for affinity groups (Consumer experience Life cycle management) Innovation Standardization Newer & better Mass production product features Mass Advertising Innovation / Standardization Staccato Customization Contiguous 7
  8. 8. What creates Attachments / Affinity?Quality of experience –Good / Bad, IndifferentDepth of experience – Degree to whichexpectations were exceeded either wayMemorability – Driven by the extent to which all 5senses were engaged 8
  9. 9. What is Experience? To experience is to feel. Operational Excellence + Customer intimacyCustomer Experience = Expectation Expectation is key determinant of the impact of the experience being delivered 9
  10. 10. How do firms deliver Experience? Through a sum total of our interactions a customer has with a firm’s… People + Process + Products + Physical / Virtual Environment • Customer • Enablement facing • Physical areas • Orientation • Backend • Tangible • Virtual areas • Professional TAT’s • Intangible • Where customers Acumen • Escalation transaction encompasses • Role clarity matrix every channel of contact • Technology enablement• All Customer engagement processes are driven by people.• Physical environment maintained by people.• All things being equal people the only differentiator.• All things being unequal people the only leveler.
  11. 11. Key Dimensions of ExperienceTANGIBLES • The appearance of physical facilities, equipment, personnel and information material/meets exceeds standards in terms of features/qualityRELIABILITY • The ability to perform the service accurately and dependably/ both in routine as well as exceptional circumstancesRESPONSIVENESS • The willingness to help customers and provide a prompt service/responding in the emotions/feelings to people & events
  12. 12. Key Dimensions of ExperienceASSURANCE • Competence - having the requisite skills and knowledge • Courtesy - politeness, respect, consideration and friendliness of contact staff • Credibility - trustworthiness, believability and honesty of staff • Security - freedom from danger, risk or doubtEMPATHY • Access (physical and social) - approachability and ease of contact • Communication - keeping customers informed in a language they understand and really listening to them • Understanding the customer - making the effort to get to know customers and their specific need
  13. 13. My People Matter• People are the only continuous & unique difference between organisation as we are all unique• This display varying degrees of customer centricity i.e. tendency to enable vs. seek to be enabled• Customers always blame people for anything good or bad that happens to them.
  14. 14. Defining & Measuring Customer CentricityCustomer centricity is the practice of putting customer first in everything theindividual does and organising all the activities around the basic objective ofdelivering superior customer Service and Value. Service Provider Attributes Customer’s Views Weight age( %) Reliability Reliability 32 % Basic Respect, Resourcefulness, Assurance 19 % Professional Acumen People Orientation, Customer 1st Mindset Empathy 16 % Personalised Responsiveness, Positive Responsiveness 22 % Outlook Product + Place Tangibles 11 %
  15. 15. What catalyses Customer Centricity • Customer centric people • Level to which they feel “Engaged”
  16. 16. What is Engagement? Engagement connotes “activation” Trait Engagement State Engagement Behavioral Engagement• Driven by an inclination to • Willingness to make experience the world • Reflected in energy “discretionary effort from a particular & enthusiasm • Organisational viewpoint – • Influenced by nature citizenship behaviour Optimistic / of work • Influenced by trust Pessimistic view of arising out of the life quality of leadership
  17. 17. What are the conditions of Engagement? • Distributive DEGREE OF SELF DETERMINATION FAIRNESS Fairness: HowSAFETY • Availability of rewards are resources to do • Employees distributive the job well & a must feel safe • Interactional sense of to be truly Fairness: How psychological interpersonal empowerment engaged roles are played out • Procedural Fairness: How processes that impact people get carried out
  18. 18. Understanding Customers’ Expectation?• The expectation norms are pretty much the same for both B2B & B2C customers• Customer expect service basics i.e. fundamentals to be right• Customers link expectations to price being paid• Customers expect companies to play “fair”• Reliability is the most important dimension in meeting expectations• The process dimension of empathy/Assurance & Responsiveness are more important for exceeding expectations• Customer expectations operate in a zone of tolerance namely from “adequate” to “desired”.
  19. 19. Are the customers expectations reasonable? Do they need to be managed? Un- anticipated Desired Expected Basic
  20. 20. Service Profit Link Customer centric people  Empowered and engaged  Spirit of service  Engaged customer  Enhanced life time value  Minimization of cost to serve and acquire  Profit and value maximization 20
  21. 21. Challenges towards making the Service Profit Chain a Reality• Top Management Mindset• Silo mindset – micro organization − Presence of multiple silos and not just one as is commonly understood − Silos between the multiple customer contact channels − Silos between front and back end of functional department − Silos between the different functions department 21
  22. 22. Challenges towards making the Service Profit Chain a Reality Service Quality Gap DefinedWord of Mouth Personal Needs Past Experience Expected Service vs Perceived Service Sales & Marketing Communication Service Quality Gap  Mismatch between management perception of expected service  Translation of management perception of expected service into service standards  Variance between standards and delivery 22
  23. 23. Management Mindset Significance of Customer Experience Strategy Mindset Organisation Behaviour Likely Results Seen as short term. Dont trust either customers or staff Customers buy on price & availability Staff stay based on salary levels - low Not seen as necessary Make no exceptionCE as a cost engagement Organisation first, customer second Organization operates as a commodity Short terms focus, guidelines Required because Repeat business mainly due to customer Limited empowerment to staff competitors are offering it inertia CEas a Seen as a cost, rather than Do only what is necesssary to hold Organization operates as a commodity necessity marketing investment customers Concerns primarily with reacting to customer problems Strategic measure to CE as a Exceed customer expectations High level of repeat business develop businessCompetititive Adequate staff empowerment Positive engagement with company Advantage Create Customer Delight Brand pormise reflected in policies & CE as an Seen as the brand in action Customers as brand advocates proceduresExpression of Tailored brand education for everyone Engaged and empowered staff the Brand Increased brand equity & higher profits Inappropriate management mindset is a major hindrance 23
  24. 24. Enablers of The Service Profit Chain• Free flow of information across organisation levels both informally & through formal platform• Audit of data capture mechanism and nomenclature• Cross-verification of qualitative inputs and external research• Process blue printing• Process fail-safing• Service recovery procedures 24
  25. 25. Enablers of the Service Profit Chain• Hiring of customer centric team members• Mystery audits of all customer facing processes – Frontlining – VoC Forums – CSaT – ESaT – Service TATs• Escalation Mechanism• Service guarantees• Price of non-conformance• Company Wide CSAT linked bonus 25
  26. 26. Audit of the Service Profit Chain• Net Cost to acquire• Cost to secure• Ration of companies to revenue• Customer attrition rates• Portfolio of attrited customers• Quality of referrals• Average Lifetime value• Active to dormant customer ratio• Nett promoter score• CSAT score• Employee attrition rate• Sales and margin contribution per employee• ESAT scores 26
  27. 27. Acknowledgements• James Heskett, Earl Sasser & Leonard Schlesinger- Harvard Business School• Janelle Barlow-TMI America• Dr. Deepak Jain- Dean-Insead• Bruce Temkin- Temkin Group• Dr. Fred Webster Jr.- Tuck School of Business• Dr. Benjamim Schneider 27
  28. 28. Click to experience the institute Let’s Begin…Visit us at or call at 1800 209 8777 for more information 28