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THE PROFIT CHAIN

THE PROFIT CHAIN

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THE PROFIT CHAIN

  1. 1. The Profit Chain Attaining Total Customer Satisfaction: Doing Things Right the Second Time Student: Vincent W. Wedelich Professor: Phaedon P. Papadopoulos, Ph. D.
  2. 2. Overview  Doing It Right the First and Second Time  Getting Customers to Complain  External and Internal Service Contracting  Service Guarantees  Service Recovery  Questions for Management  End with Questions??
  3. 3. Doing It Right the First and Second Time  “do it right the first time.” Motorola  Six sigma; zero defects.  Doing it right the second time may actually produce higher levels of satisfaction than doing it right the first time.  Must exceed the customers expectations the second time.
  4. 4. Doing It Right the First and Second Time  UPS is an example of doing it right the first time.  But if they did not do it right; and had to try and figure out what happened; they did not have the ability to resolve where the package was.  FEDEX had this ability to track packages.
  5. 5. Next Topic  Doing It Right the First and Second Time  Getting Customers to Complain  External and Internal Service Contracting  Service Guarantees  Service Recovery  Questions for Management  End with Questions??
  6. 6. Getting Customers to Complain  The British Airways Experience  The Problem  Some Responses
  7. 7. The “Complaint Iceberg” at British Airways. 8% 23% 69% Don’t talk to Anyone Talk to nearest BA Employee Talk to Customer Relations Rep THE KNOWN WATERLINE To put this into perspective: An opportunity occurs somewhere on the network every 15 seconds. Potential Revenue Lost (Millions) £ 47 £ 141 £ 423
  8. 8. The Complaint Escalation Pyramid The pyramid described in numbers The Complaint Process Stated in Percentages Vice President Middle Management Frontline Service Providers 1 Complaint = 2 Customers dissatisfied at middle management level = 10 who complain to middle management = 50 Customers who remain dissatisfied after frontline effort = 200 who complain to front line = 500 who are dissatisfied = One in two of these still dissatisfied complain 25% of complainants still dissatisfied One in five complain 25% of these customers still dissatisfied = 40% Complain = 100% of dissatisfied customers =
  9. 9. Next Topic  Doing It Right the First and Second Time  Getting Customers to Complain  External and Internal Service Contracting  Service Guarantees  Service Recovery  Questions for Management  End with Questions??
  10. 10. External and Internal Service Contracting  Customer Service Contracting  Internal Service Contracting  Supplier Service Contracting
  11. 11. External and Internal Service Contracting  Customer Service Contracting  Serve as a device for:  Improving customer satisfaction  Internal operations  Supplier performance
  12. 12. External and Internal Service Contracting  Internal Service Contracting  Serve as a device for internal departments: 1) Which other departments in the organization are our most important customer’s? 2) What are their needs and our current performance? 3) What is the gap between their needs and our current performance? 4) What are the costs and payoffs of closing the gap?
  13. 13. External and Internal Service Contracting  Supplier Service Contracting  ISO 9000 is a quality program that suppliers are required to have in order to supply clients that have achieved this certificate of quality.  Has led to a demand for service guarantees.
  14. 14. Next Topic  Doing It Right the First and Second Time  Getting Customers to Complain  External and Internal Service Contracting  Service Guarantees  Service Recovery  Questions for Management  End with Questions??
  15. 15. Service Guarantees  Questions in Guarantee Design  What’s the Primary Purpose  Internal Guarantees  Impact on Suppliers  The Economic of Service Guarantees  Putting Guarantees in Context
  16. 16. Putting Guarantees in ContextCustomerSatisfactionSurveyRatings Service Guarantees Invoked Few Many Low High Celebrate Performance Send help Change Management SCATTER DIAGRAM OF UNIT PERFORMANCE
  17. 17. Next Topic  Doing It Right the First and Second Time  Getting Customers to Complain  External and Internal Service Contracting  Service Guarantees  Service Recovery  Questions for Management  End with Questions??
  18. 18. Service Recovery  A Case for Capability  The service recovery needs to take place at the frontline.  Fast  Customized  Personalized
  19. 19. Service Recovery  The British Airway method  Convince all customer-contact personnel that customers were to be trusted and that the airlines wished to retain their business.  Give the customer an Apology.  To be asked what they wanted as a solution.  A quick resolution of the complaint.  Assurance that the problem was being fixed.  Solutions by CareLine phone calls if possible.
  20. 20. The Service Recovery Payoff Non complainants Complaints Not Resolved Complaints Resolved Complaints Resolved Quickly How many of your unhappy customers will buy from you again? Minor Complaints ($1-5 losses) Major Complaints (over $100 losses) Percent of customers that will buy from you again. 9% 37% 19% 46% 54% 70% 82% 95% Dissatisfied Customers’ Repurchase Intentions under Various Conditions
  21. 21. Next Topic  Doing It Right the First and Second Time  Getting Customers to Complain  External and Internal Service Contracting  Service Guarantees  Service Recovery  Questions for Management  End with Questions??
  22. 22. Questions for Management  What is the rate at which dissatisfied customers complain about your products or services? How do you know?  How are complaints encouraged by your organization? What kind of incentives are provided to customers to complain?
  23. 23. Questions for Management  Are a majority of customer complaints made to representatives of the organization who can do something about them? If not, what has to be done to insure that this is the case?  Are the reactions of dissatisfied customers assembled in one data base (a consolidated “listening post”) for management information, planning, and longer term action?
  24. 24. Questions for Management  Based on information from dissatisfied customers, what is the potential for renegotiating agreements both across relevant departments of your organization and with “supply chain” partners?  What does fast, personalized, customized recovery mean in your business? What has to be done to achieve it in your organization?
  25. 25. Questions for Management  To what extent has service contracting been employed within the organization and with other organizations in the supply chain?  How would a service guarantee help your organization elicit complaints, provide an incentive for effective service recovery, and service as a vehicle for improving service operations?
  26. 26. Questions??  References:  James L. Heskett, W. Earl Sasser Jr, Leonard A. Schlesinger, The Service Profit Chain, pp. 175 -197 (The Free Press) ,

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