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Understanding and Managing the Service Profit Chain | Aegis Global Academy

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Management Institute in Coimbatore, India offering management development program. Site provides information on courses, admission, student life, faicilities, and placements.

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Understanding and Managing the Service Profit Chain | Aegis Global Academy

  1. 1. World Class “Customer Engagement” Practices comes to your doorstep
  2. 2. Understanding and Managing the Service Profit Chain 2
  3. 3. What is the objective of the business? Creation of Wealth For Whom Employees?  Shareholders?  Customers / Society? Ok, let’s agree it is for shareholders. 3
  4. 4. How is Wealth Created? By transforming the resources Men, Money, Technology, Raw Materials Into something that customer’s “VALUE” 4
  5. 5. What is Value? Economic Definition: Economic Value = Reference Value + Differentiation Value (price of best alternative) (difference +ve/-ve with best alternative) Consumer Value = Rational + Emotional benefits Price (Financial + Physical and emotional efforts to acquire and consume products) Summing up: The difference between the cost of your product or service and what the consumer is willing to pay. 5 Value is always what is attributed by the customer
  6. 6. How is Value processed by Consumers 6 Psychological Dimension Reassurance / Status / Trust/Affection Economic Dimension Price Perception (Cheap, Expensive and Fair) Functional Dimension Features Offered (Relevant /irrelevant) While the bottom two relate to the core product ,the upper dimension mostly comes from services facilitating the core product
  7. 7. How do Firms Deliver Value? 7 Customization Mass customization of products / processes / communication for affinity groups (Consumer experience Life cycle management) Standardization Mass production Mass Advertising Innovation Newer & better product features Innovation / Standardization Staccato Customization Contiguous
  8. 8. What creates Attachments / Affinity? Quality of experience –Good / Bad, Indifferent Depth of experience – Degree to which expectations were exceeded either way Memorability – Driven by the extent to which all 5 senses were engaged 8
  9. 9. 9 What is Experience? Operational Excellence + Customer intimacy Expectation To experience is to feel. Customer Experience = Expectation is key determinant of the impact of the experience being delivered
  10. 10. Through a sum total of our interactions a customer has with a firm’s… How do firms deliver Experience? People + Process + Products + Physical / Virtual Environment • Enablement • Orientation • Professional Acumen • Role clarity • Customer facing • Backend TAT’s • Escalation matrix • Technology enablement • Tangible • Intangible • Physical areas • Virtual areas • Where customers transaction encompasses every channel of contact • All Customer engagement processes are driven by people. • Physical environment maintained by people. • All things being equal people the only differentiator. • All things being unequal people the only leveler.
  11. 11. Key Dimensions of Experience TANGIBLES • The appearance of physical facilities, equipment, personnel and information material/meets exceeds standards in terms of features/quality RELIABILITY • The ability to perform the service accurately and dependably/ both in routine as well as exceptional circumstances RESPONSIVENESS • The willingness to help customers and provide a prompt service/responding in the emotions/feelings to people & events
  12. 12. Key Dimensions of Experience ASSURANCE • Competence - having the requisite skills and knowledge • Courtesy - politeness, respect, consideration and friendliness of contact staff • Credibility - trustworthiness, believability and honesty of staff • Security - freedom from danger, risk or doubt EMPATHY • Access (physical and social) - approachability and ease of contact • Communication - keeping customers informed in a language they understand and really listening to them • Understanding the customer - making the effort to get to know customers and their specific need
  13. 13. My People Matter • People are the only continuous & unique difference between organisation as we are all unique • This display varying degrees of customer centricity i.e. tendency to enable vs. seek to be enabled • Customers always blame people for anything good or bad that happens to them.
  14. 14. Customer centricity is the practice of putting customer first in everything the individual does and organising all the activities around the basic objective of delivering superior customer Service and Value. Service Provider Attributes Customer’s Views Weight age( %) Reliability Reliability 32 % Basic Respect, Resourcefulness, Professional Acumen Assurance 19 % People Orientation, Customer 1st Mindset Empathy 16 % Personalised Responsiveness, Positive Outlook Responsiveness 22 % Product + Place Tangibles 11 % Defining & Measuring Customer Centricity
  15. 15. What catalyses Customer Centricity • Customer centric people • Level to which they feel “Engaged”
  16. 16. What is Engagement? Engagement connotes “activation” Trait Engagement State Engagement Behavioral Engagement • Driven by an inclination to experience the world from a particular viewpoint – Optimistic / Pessimistic view of life • Reflected in energy & enthusiasm • Influenced by nature of work • Willingness to make “discretionary effort • Organisational citizenship behaviour • Influenced by trust arising out of the quality of leadership
  17. 17. What are the conditions of Engagement? SAFETY • Employees must feel safe to be truly engaged FAIRNESS • Distributive Fairness: How rewards are distributive • Interactional Fairness: How interpersonal roles are played out • Procedural Fairness: How processes that impact people get carried out DEGREE OF SELF DETERMINATION • Availability of resources to do the job well & a sense of psychological empowerment
  18. 18. Understanding Customers’ Expectation? • The expectation norms are pretty much the same for both B2B & B2C customers • Customer expect service basics i.e. fundamentals to be right • Customers link expectations to price being paid • Customers expect companies to play “fair” • Reliability is the most important dimension in meeting expectations • The process dimension of empathy/Assurance & Responsiveness are more important for exceeding expectations • Customer expectations operate in a zone of tolerance namely from “adequate” to “desired”.
  19. 19. Are the customers expectations reasonable? Do they need to be managed? Un- anticipated Desired Expected Basic
  20. 20. Service Profit Link  Customer centric people  Empowered and engaged  Spirit of service  Engaged customer  Enhanced life time value  Minimization of cost to serve and acquire  Profit and value maximization 20
  21. 21. Challenges towards making the Service Profit Chain a Reality • Top Management Mindset • Silo mindset – micro organization − Presence of multiple silos and not just one as is commonly understood − Silos between the multiple customer contact channels − Silos between front and back end of functional department − Silos between the different functions department 21
  22. 22. Challenges towards making the Service Profit Chain a Reality Expected Service vs Perceived Service Service Quality Gap  Mismatch between management perception of expected service  Translation of management perception of expected service into service standards  Variance between standards and delivery 22 Word of Mouth Personal Needs Past Experience Sales & Marketing Communication Service Quality Gap Defined
  23. 23. Management Mindset Strategy Mindset Organisation Behaviour Likely Results Seen as short term. Don't trust either customers or staff Customers buy on price & availability Not seen as necessary Make no exception Staff stay based on salary levels - low engagement Organisation first, customer second Organization operates as a commodity Short terms focus, guidelines Required because competitors are offering it Limited empowerment to staff Repeat business mainly due to customer inertia Seen as a cost, rather than marketing investment Do only what is necesssary to hold customers Organization operates as a commodity Concerns primarily with reacting to customer problems Strategic measure to develop business Exceed customer expectations High level of repeat business Adequate staff empowerment Positive engagement with company Create Customer Delight Seen as the brand in action Brand pormise reflected in policies & procedures Customers as brand advocates Tailored brand education for everyone Engaged and empowered staff Increased brand equity & higher profits CE as an Expression of the Brand CE as a cost CEas a necessity CE as a Competititive Advantage 23 Significance of Customer Experience Inappropriate management mindset is a major hindrance
  24. 24. Enablers of The Service Profit Chain • Free flow of information across organisation levels both informally & through formal platform • Audit of data capture mechanism and nomenclature • Cross-verification of qualitative inputs and external research • Process blue printing • Process fail-safing • Service recovery procedures 24
  25. 25. Enablers of the Service Profit Chain • Hiring of customer centric team members • Mystery audits of all customer facing processes – Frontlining – VoC Forums – CSaT – ESaT – Service TATs • Escalation Mechanism • Service guarantees • Price of non-conformance • Company Wide CSAT linked bonus 25
  26. 26. Audit of the Service Profit Chain • Net Cost to acquire • Cost to secure • Ration of companies to revenue • Customer attrition rates • Portfolio of attrited customers • Quality of referrals • Average Lifetime value • Active to dormant customer ratio • Nett promoter score • CSAT score • Employee attrition rate • Sales and margin contribution per employee • ESAT scores 26
  27. 27. Acknowledgements • James Heskett, Earl Sasser & Leonard Schlesinger- Harvard Business School • Janelle Barlow-TMI America • Dr. Deepak Jain- Dean-Insead • Bruce Temkin- Temkin Group • Dr. Fred Webster Jr.- Tuck School of Business • Dr. Benjamim Schneider 27
  28. 28. 28 Click to experience the institute http://www.youtube.com/watch?v=1SPFeM1Xh5k&blend=11&lr=1&ob=0 Let’s Begin… Visit us at www.aegisglobalacademy.com or call at 1800 209 8777 for more information

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