What is the Service-Profit Chain?

Currently I am pursuing a master’s in business administration at the University of Nevada, Reno. Last semester I took a class in which I was introduced to the idea of the service-profit chain, shown below. The service-profit chain is broken down into two parts, the blue shaded area represents the company internals, to the right of the blue represents customer satisfaction and loyalty which leads to revenue/growth. This diagram shows the progression from internal service quality through presenting your product to the customer and how each process sends feedback throughout the chain.

My professor from my class was Bret L. Simmons, in his article says, If money does not hit the top line, it will NEVER hit the bottom line.”
Also, he explains the logic of the service profit chain, here are the top two points.

  • The priority of a business should be growth through excellence.
  • The key to growth is loyal customers. If we don’t have customers, we don’t have revenue. It’s MUCH less expensive to keep an existing customer than to get a new one.

The Harvard Business Review has a wonderful article, that goes describes the service-profit chain, “The service-profit chain establishes relationships between profitability, customer loyalty, and employee satisfaction, loyalty, and productivity. The links in the chain (which should be regarded as propositions) are as follows: Profit and growth are stimulated primarily by customer loyalty.”

From the service-profit chain we can see that a company has two customers. External customers that buy our product or service and internal customers being employees. Excellence with customers starts with internal excellence of our companies. We want loyalty to our brand with both customers with happy and engaged employees and customers. Satisfying customers is not what we are after we need exceed our customers’ expectations. Notice how most of the service-profit chain is the internals of our company. We have control over our company structure to make changes to improve at these processes.

What do you think of the service-profit chain? Take a moment, tell me what you think. Comment and share.

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