Service Profit Chain Valuation Argument - Essay Example

Service Profit Chain Valuation Argument about whether employee satisfaction can lead to satisfaction in hence leads to loyalty : Institution: Course: Date: Introduction It is a universal fact that success in the resort and spa industry and other service industries, is determined by consumer satisfaction. Other than using popular advertising media and channels, the resort and spa industry benefits most from word-of-mouth. Word of mouth or viva voice, signifies that a customer has emotionally bonded with the resort or spa. The importance of such advertising cannot be emphasized due to the subjective nature of this industry. Customer satisfaction greatly determines the loyalty of customers to the resort or spa in question. Customer loyalty means that the resort will have repeat business from the same customers and, therefore, remain doing business (Kamakura et al. 2002, p.311). Furthermore, customer loyalty increases the repurchase levels which translate to profitability and a large consumer base. In the service industry, consumer satisfaction is the driving force behind marketing thought and practice (Chakrapani 1998, p.47). In practice, consumer satisfaction is the consumer’s comparison between their purchase and use with the rewards and costs of the service. Other than consumer satisfaction, employee satisfaction is also another factor that determines the profitability of resorts and spas. The employees provide the various services to the customers. Their service delivery is what determines the customer satisfaction and loyalty in the long run. For this reason, employees are the essential part in the service industry. Management in this industry has to manage employees in such a way that they are satisfied. This is the biggest challenge in the hospitality industry as it determines the overall success of the resort or spa. In addition, employee satisfaction increases guest satisfaction and ultimately guest loyalty. This essay analyzes the two concepts, consumer satisfaction, and employee satisfaction, using the service profit chain theory to fully understand their significance to the service industry. Resort and spa industry Advertising and marketing in this industry relies heavily on consumer behavior; it is the success scale of this industry. The challenge in this industry is trying to attract customers for longer visits and repeat business (Smith & Puczko 2009, p.13). In comparison to other hospitality segments, the resort and spa industry is the fastest growing segment in this industry. Their number has grown steadily over the last few years due to their unique and novel services they provide. Smith and Puczko (2009) attribute the growth of this industry to the recent global trend of alternative activities that increase the health and well-being of individuals (p.7). There are two types of spas: amenity and destination spas, which provide different services to its customers. In amenity spas, they are part of a large hotel, or resort and their services complement those of the resort or hotel (Smith & Puczko 2009, p.11). Destination spas, on the other hand, are stand-alone spas that provide services for customers. Their services focus on improving the skin of customers, reducing their physical and mental stress and enhancing the lives of the customers. Customers, upon visiting a spa, expect to improve their health, beauty, lifestyle and their overall wellbeing. Resorts, on the other hand, are places set aside for the relaxation and recreation of customers. They are the embodiment of happy and successful lives of individuals. The most frequent customers are friends and families who come to resorts in order to bond amongst themselves (Smith & Puczko 2009, p.38). The most important quality of resorts is the privacy it provides to its customers in order to reduce interferences from other customers in the same resort. Resorts offer new and exciting experiences for their customers. Service Profit Chain Theory: Holistic assessment The service profit chain theory links the concepts of profitability with consumer loyalty and employee satisfaction. Other pillars of the theory include productivity, external service value, and internal service quality. According to the Service Profit Chain (1999), satisfaction is dependent on the value of services provided to customers while value is dependent on loyal and productive employees (p2). Alternately, employee satisfaction results from support services and policies that cater for the delivery of quality service. Management in the hospitality industry understands the importance of consumer satisfaction and its reflection on profitability (Kamakura et al. 2002, p.295). However, most fail to take into consideration the importance of employee satisfaction in the profitability of the resort or spa. The emphasis on revenue generation by management often overlooks the significance of employees in the industry. It is an undeniable factor that consumer satisfaction determines the success of a resort; however, it has several pillars that facilitate it as the service profit chain theory highlights. Kamakura et al. (2002) concede that it is to attract new customers to a resort or any other hospitality institution (p.297). The challenge is ensuring the customers repeatedly come back to the institution and that they have high levels of intention of repurchasing. To ensure that the resort is continuously profitable, the theory emphasizes the importance of customer loyalty in increasing profitability and growth. Loyalty enables the resort to have quality of market share instead of the traditional quantity of market share. As mentioned earlier, customer satisfaction is entirely dependent on customer loyalty. Heskett (2003) conclude that once customers are satisfied with the service provided to them at the resort they are more likely to visit the resort and spa repeatedly (p.71). In addition, satisfied customers are more likely to bring new customers to the institution. The theory further states that value of service delivery determines customer satisfaction. Resort and spa customers are value oriented as they can assess the quality of service delivered with the price they paid for the service. Value is the comparison of the cost the customer incurs in acquiring the service, which is the price and other costs (Heskett et al. 1999, p.52). To increase the value of the services delivered, employee productivity becomes important. The resort and spa is required, by the theory, to develop policies that allow for employees to increase their overall productivity. These policies, according to Heskel et al. (2003) include flexible work roles and schedules to increase the efficiency and productivity of employees (p.78). Increase in productivity translates to customers’ requests and demands being met by satisfied employees; ultimately leading to satisfied customers. Other than customer loyalty, employee loyalty is also emphasized by this theory. As with productivity, employee loyalty is increased via the implementation of policies that caters for the welfare of the employees. In the process, the employees feel that they are a valuable member of the institution and work harder to improve the stature and reputability of the resort or spa. Employee turnover determines employee loyalty, the higher the turnover, the less loyal the employees and vice versa. To reduce this turnover, the service profit chain recommends that resorts should increase employee satisfaction. Internal quality is the metric that measures employee satisfaction levels in an organization. It determines the attitudes and feelings that employees have toward their workload, colleagues and the institution as a whole. The service profit chain model relies heavily on the leadership of the resort. The leader should fully understand the service-profit chain and promote that the resort should adopt a culture that emphasizes on the provision of quality services to customers and employees (Kamakura et al. 2002, p.301). The model heavily relies on the leadership who are required to concentrate on ensuring that their employees are satisfied. Criticism of the service profit chain model In summation, the service profit chain model states happy employees lead to happy customers and ultimately lead to happy shareholders. It correlates the employee and customer satisfaction and profits. In the hospitality industry, organizations with higher levels of employee satisfaction are able to deliver quality and better services to their customers. However, employee satisfaction does not necessarily translate to better customer experience. Employee engagement is important, but it is not solely sufficient for improving customer satisfaction (Gitomer 2005, p.41). There are companies that have over-emphasized on the importance of employee engagement, but the employees deliver sub-par services for customers. There several issues that should be addressed to ensure the effectiveness of employee engagement in the service profit chain model. First and foremost, management should educate their employees on customer priorities. Employees should have a clear understanding of what the customers want others their efforts will be misdirected. They should also be aware that customers’ expectations change unexpectedly and often differ from the mental models. The employees should be quick to learn and adapt to the ever-changing customer priorities. Secondly, the resort or spa should have an intended customer experience after receiving services from the institution. The experience should be consistent for all customers and employees should have a clear understanding of what is expected from them. Thirdly, the resort should streamline its policies, systems and procedure to ensure that they do not get in the way of service delivery. By streamlining their policies, employees are able to deliver quality service delivery which increases customer experience. The last but not least, management should seek to address its organization’s “unwritten rules” which are hurdles to achieving the desired customer experience. These “unwritten rules” are informal corporate culture that drives the company. Employee experience influences these rules, and they form hurdles to the attainment of consistent customer experience. The linkage of Employee satisfaction and Consumer satisfaction Employee Satisfaction Also widely referred to as employee engagement, it is the connection that an employee of a firm has with the firm and its administration (Jyoti & Sharma 2012, p.297). Jyoti and Sharma continue to state that this connection, often an emotional one, influences the employee to exert greater effort into his or her work so as to help the organization to fulfill its goals (2012). In the managerial perspective, employee engagement and empowerment is an important factor due to its effect on the organization’s overall productivity, turnover, retention, and customer service. As mentioned earlier in the essay, employee satisfaction plays one of the most important roles in the hospitality industry. In Albrecht’s (2010) opinion, employees should be able to provide consistent quality of service to customers; further increasing customer experience and satisfaction (p.53). High level of absenteeism and high staff turnover would result in a reduced bottom line of a resort. Management, specifically the Human Resource department, would be involved with continuous recruitment, which would affect the workforce stability of the institution. For this reason, employee satisfaction is a top priority as satisfied employees are more productive and committed to their jobs (Albrecht 2010, p.75). Management should engage employees and know their opinion on matters such as salary and supervision. Are they satisfied with their current salaries? Do they feel that their salaries reflect their current workload? Is the level of supervision to much? These are some of the questions that give upper management an inkling on the levels of employee satisfaction. In addition to salary and supervision, management should motivate their workforce to increase their productivity and commitment. It is notable that issues of salary and supervision, known as hygiene issues, do not motivate employees; however, they reduce the levels of dissatisfaction among employees (Jyoti & Sharma 2012, p.299). Upper management at resorts should review their policies, interpersonal relations, and working conditions. Motivation theories, according to Herzberg et al. (1993) are able to promote employee satisfaction and increase their productivity (p.10). In spite of its significance in the service profit chain, Gitomer states that employee satisfaction is the wrong metric for this model (p.48). An employer might go to greater lengths of servicing their employees’ needs such as company cars, vacation policies, shorter office hours and others. To the employer, these benefits should increase their loyalty and commitment levels (Gitomer 2005, p.50). However, this is not usually the case as satisfied employees do not translate to productive employees. For this reason, employers should target engagement and not satisfaction. Employers should engage employees in the decision-making process of the organization. Through engagement, employees eschew the “subordinate” mentality as they are a part of the organization. Customer satisfaction The hospitality industry is similar to any other economic industry because it is highly competitive. Resorts and spas are numerous, and they all attract the same demographic; middle and upper class. In order to fully satisfy this demographic, resorts and spas have to provide quality services that ensure that customer satisfaction. Subsequently, the resort is assured of repeat business from its customers. As the old marketing adage states, satisfied customers are loyal customers. Loyal customers recommend the resort to new customers leading to a large and loyal customer base (Jyoti & Sharma 2012, p.305). In comparison to other industries, customers in the hospitality industry are very keen on the type of service they receive. Hill et al. (2007) state that customer satisfaction is often at the forefront of an institution’s plans as it determines its profitability (p.83). Today’s customers emphasize on having a memorable experience from their favorite resort and spa (Woratschek & Horbe 2006, p45). The quality of service should meet, and surpass, the customer’s expectations for it to be memorable. Superior quality of service includes anticipating customers’ needs and extending the normal standard practices in order to increase their satisfaction. The resort and spa should deliver on the promises they advertize. This engages the customers and ensures that they come back to the institution. Hill et al. (2007) concede that customers are likely to be frustrated when advertised services are not delivered as promised (p.95). Furthermore, consistent service delivery by the staff ensures that customers are loyal to the institution. It becomes easy to differentiate the institution from other similar institutions due to the unique services. Institutions in the hospitality industry should focus on their customers at all times if they are to increase their loyalty (Hill et al. 1999, p.87). In cases where the service delivered to customers was below par, customers should have a way to communicate this to management of the institution (Grigoroudis & Siskos 2010, p.63). Their grievances and concerns should be reviewed attentively so as not to improve their experience the next time they visit the resort. By allowing customers to comment on their experiences, the institution reduces the chances of its customers spreading negative reviews regarding their experiences. In Woratschek and Horbel’s (2006) opinion, upper management should communicate directly to disgruntled customers regarding any improvements and changes that have occurred (p.49). The relationship between employee satisfaction and customer satisfaction There is some correlation between employee satisfaction and customer satisfaction especially in the hospitality industry. The customers interact with employees, who provide the services as stated in the resort’s manifest. According to Allen and Wilburn (2002), employees are, therefore, in the position to develop awareness of customer needs and expectations (p.7). For this reason, the service-profit chain model postulates that satisfied employees are motivated to provide customers with better services. In addition to being motivated, the employees are empowered; that is, they have the necessary skills and resources to adequately serve customer needs and demands (Allen & Wilburn 2002, p.10). The theory further hypothesizes that employees should have a positive perception of the service that they provide. This perception enables the employees to deliver better services, and they are able to provide customers with a consistent experience (Allen & Wilburn 2002, p.11). Lastly, employees in the service industry are usually in a position to provide customers with interpersonal sensibility, which increases customer satisfaction. There is a definite cause-and-effect relationship between customer satisfaction and employee satisfaction. Customer satisfaction, at times, does not necessarily translate to customer loyalty; which is the acid test of loyalty (Gitomer 2005, p.37). Customer loyalty is dependent on customers perception of the value of money spent on acquiring the service from the resort. The ever-changing customer needs in the resort and spa industry requires these institutions to adapt to the changing customer needs. Being a competitive industry, Gitomer (2005) states that customers have a wide range of variety of institutions to choose from (p.38). Therefore, it is very difficult to maintain customer loyalty as customers are bound to visit other resorts to satisfy their curiosity (Woratschek & Horbel, 2006, p.55). Hotels should regularly follow up on their customers in order to ensure their loyalty. These follow-ups ensure that the hotel or resort, is on the minds of customers. In conclusion, customer satisfaction is somewhat dependent on employee satisfaction. To increase customer loyalty, however, requires a different approach to that of increasing their satisfaction. Customer satisfaction is reliant on being provided with great customer service. The employees should have the willingness and spirit to go beyond what is required of them. Reference List Albrecht, S. (2010). Handbook of employee engagement. Cheltenham, UK: Edward Elgar. Allen, D. and Wilburn, M. 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