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To what extent can Hesketts Service Profit Chain be supported by empirical evidence and other arguments - Essay Example

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The concept of Service Profit Chain tends to explain that most of the leading companies across the globe try and maintain their leadership position by managing a quantifiable set of relationships that directly links profits and growth to customer loyalty and satisfaction, employee loyalty and satisfaction, and productivity…
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To what extent can Hesketts Service Profit Chain be supported by empirical evidence and other arguments
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Download file to see previous pages The linkage in the chain which is in fact the prepositions are between profit and growth. These two are particularly inspired by customer loyalty. Very clearly, loyalty is the direct attribute of customer satisfaction. The reason behind a customer being extremely satisfied about the product or a service is the value of the services that were provided to the customers. Hence, it can be otherwise stated that Value is created by satisfied, loyal and productive employees.
The Service-Profit Chain (SPC) is a conceptual framework, which describes a process for delivering superior service value (Heskett, Sasser, & Schlesinger, 1997). According to the framework, positive business outcomes result when service delivery activities lead to customer satisfaction and customer loyalty. However, managerial implementation of the SPC has remained problematic, primarily because of certain limitations in the modelling methods commonly employed. Providing managers with the ability to model this process in a way that is of practical value to decision makers would be a considerable contribution (Anderson, 2004).
Based on the Service Profit Chain model, profitability and growth are determined primarily by maximizing the lifetime value of your customers, and that value is fully realized only when you earn the customer's loyalty. In one study, a 5% increase in customer loyalty produced profit increases from 25% to 85%. A loyal customer is one who obeys the three R's: Retention, Repeat Sales, and Referrals. Major corporations (many of which are household names) subscribe to the Service Profit Chain model and have achieved a level of success that is enviable.
The diagram below outlines the links in the Service-Profit Chain. From the diagram given below, it can be clearly noticed that one of the most important links in this chain is the interface between the external service value and customer satisfaction. The external service value represents the service concept: the results for the customers. This is the interface of your installers, sales reps and managers, and your client (SENCORE).


Now, the above diagram clearly suggests that customer loyalty is driven by customer satisfaction, customer satisfaction is driven by value, and value is driven by employee productivity, and so on. As already noticed the beginning of the chain is Internal Service Quality. It becomes clear that employee satisfaction and loyalty are directly proportional to the service they provide to your customers. The success of any business thus depends on how the organization cultivates its employees into a productive, passionate, quality-oriented team (SENCORE).
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