Value Chain Management:

Customer Retention

Service-Profit Chain

Leverage Corporate Performance Through Linking and Satisfying Your Employees and Customers

Vadim Kotelnikov personal logo Vadim Kotelnikov

Founder, Ten3 Business e-Coach Inspiration and Innovation Unlimited!

"It's People, Service, Profit,  not Profit, Service, People." ~ Fred Smith, Founder, Federal Express

"Happy employees equal happy customers." ~ Gilbert International

"The way management treats their associates is exactly how the associates will then treat the customers." ~ Sam Walton

 

Winning Customers (PowerPoint download)

Why Companies Fail to Leverage the Service-Profit Chain

Major Obstacles1

  • Tunnel vision: they focus solely on transactions, view the lifetime value of a customer relationship as the arithmetic sum of the transactions they conducts with that client.

  • They don't really seek to build relationships with the client, thus diminishing synergies that come into play when enduring relationships are built and nurtured.

  • They forfeit the opportunities for gaining referrals, generating word of mouth, cross-selling, and building barriers to competitive encroachment.

  • Skewed cultural bias: they reward employees on transactional basis and are unwilling to change their internal model to one that rewards people for building and maintaining relationships.

 

Holistic Approach to Customer Relationships

as opposed to a transactional focus

  • Customer owns the relationship, not you

  • Look beyond the arithmetic value of individual transactions to all the ways you can serve the customer to capture and develop lasting relationships

  • Once you have captured customer relationships, service the customer relentlessly

  • Develop financial system that truly captures the financial dynamics of customer relationships

  • Develop system that rewards people for building and maintaining customer relationships

How To Make Customer Service and Essential Part of Your Corporate Culture

  • Demonstrate continuously to your employees that in your company's order of priorities, customer service comes before all else... More

Creating Customer Value: 9 Questions

 

 

Achieving Deep Customer Focus

10 Critical Breakthroughs

By. Prof. Sandra Vandermerwe, Tanaka Business School, University of London

  • Build a compelling case. Use the customer-activity cycle to develop detailed stories that exert rational and emotional appeal... More

The GE Leadership Effectiveness Survey (LES)

Why Service-Profit Chain?

It is estimated that two-thirds of customers who defect do so because of poor service. In order for customer service to drive profits, every link in your service-profit chain employee capability, job satisfaction, productivity, employee loyalty and customer satisfaction must be strong.

Straight Line between Superior Service and Sustainable Profit Growth

Delivering top quality service must be brought to the top of your company's needs hierarchy as one can draw a straight line between superior service and your sustainable profit growth. To achieve success, you must make superior service second nature of your organization.

What is Service-Profit Chain?

The service-profit chain is a powerful phenomenon that stresses the importance of people both employees and customers and how linking them can leverage corporate performance. The service-profit chain is an equation that establishes the relationship between corporate policies, employee satisfaction, value creation, customer loyalty, and profitability.

Need for Seamless Integration of the Service-Profit Chain Links

A seamless integration of all components in the service-profit chain employee satisfaction, value creation, customer satisfaction, customer loyalty, and profit and growth links all the critical dynamics of top customer service. "The company guides, nurtures, and empowers its employees, and the employees play a vital role in securing customer satisfaction and the benefits that accrue from it."1

Satisfying Your Employees

Success comes through people. If you understand what motivates people, you have at your command the most powerful tool for dealing with them to get them achieve extraordinary results. "When companies are effective in satisfying their employees, employees stay longer, make a deeper commitment to the business, recommend ways to improve the company's products and services, and work harder to satisfy the customer".1

"In almost every survey of factors that motivate employees in the workplace, job satisfaction is at or near the top of the list, far surpassing pay and benefits."4 Creating a work environment that encourages rapid response to customers' needs and attentive follow-through is the key to leveraging the power of your service-profit chain... More

The Fun Factor

Why would people want buy from you if they don't enjoy doing so? Making what you have to sell fun to buy is simply taking the whole process one step further. "If you can make your customers laugh, and excite them with your vision of what life can be, they are not going to walk into your outlets, but run into them. Running a successful business should be fun for you, and there's every reason why you should be able to communicate that sense of fun to your customers. Certainly, if you aren't having fun, you probably aren't running a successful business."5... More

Satisfying Your Customers

Customer satisfaction is a critical component of your sustainable profitability and growth. To make make customer service an essential part of your corporate culture and produce empowered and motivated employees who are committed to ever higher standards of customer service and satisfaction you must demonstrate continuously that in your company's order of priorities, customer service comes before all else. You must develop a system for collecting customer satisfaction data and relaying this information to those responsible for value creation, and develop a system that rewards people for building and maintaining customer relationships... More

Customer Loyalty

Delighted and loyal customers will return for follow-on business without considering alternatives of comparing the competition... More

Holistic Approach to Customer Relationships

Unleashing the power of the service-profit chain will improve your performance. Moving from a focus on transactions to a focus on customer relationships delivers sustainable financial advantages. Your must look beyond the arithmetic value of individual transactions to all the ways you can serve the customer to capture and develop lasting relationships.

Customer Partnership

"Customer partnership is a shared journey to create a future for both parties that is better than either could have developed alone."3 The customer is the foundation of your organization's success. In today's turbulent times of rapid and chaotic change, "no force is more grounding and stabilizing than a partnership with customers."3 Creating a partnership with customers will help your organizations maintain the focus you need to make good decisions and harness the power and commitment you need to weather volatile times. Customer partnership is more than "putting customers first", or  finding mutually satisfactory solutions to shared problems, or  a dedication to excellence in every sale or service encounter. It also requires commitment to forging long-term relationships that create synergies of knowledge, security, and adaptability for both parties... More

80/20 Theory of Effective Selling and Competing

80/20 Principle helps you to direct your attention where the real threat of competition exists. 80% of your revenue comes from 20% of your customers. Know who your top revenue-producing customers are and make sure you meet their needs to win their loyalty. "Focusing on 20% of your customers is a great deal easier than focusing on 100% of them." Being customer centered on all your customers is impossible. "But cherishing the core 20% is both feasible and highly rewarding."6... More

 

 

 

References:

  1. "Extreme Management", Mark Stevens

  2. "Motivate to Win", Richard Denny

  3. "The Basics of Leadership", Merlin Ricklefs

  4. "Exceptional Customer Service", Lisa Ford, David McNair, and Bill Perry

  5. "The Seven Deadly Skills of Competing", James Essinger & Helen Wylie

  6. "The 80/20 Principle", Richard Koch