THE PROFIT CHAIN

1. The Profit Chain
Attaining Total Customer
Satisfaction: Doing Things
Right the Second Time
Student: Vincent W. Wedelich
Professor: Phaedon P. Papadopoulos, Ph. D.

2. Overview
 Doing It Right the First and Second Time
 Getting Customers to Complain
 External and Internal Service Contracting
 Service Guarantees
 Service Recovery
 Questions for Management
 End with Questions??

3. Doing It Right the First and Second
Time
 “do it right the first time.” Motorola
 Six sigma; zero defects.
 Doing it right the second time may actually
produce higher levels of satisfaction than
doing it right the first time.
 Must exceed the customers expectations the
second time.

4. Doing It Right the First and Second
Time
 UPS is an example of doing it right the first
time.
 But if they did not do it right; and had to try
and figure out what happened; they did not
have the ability to resolve where the package
was.
 FEDEX had this ability to track packages.

5. Next Topic
 Doing It Right the First and Second Time
 Getting Customers to Complain
 External and Internal Service Contracting
 Service Guarantees
 Service Recovery
 Questions for Management
 End with Questions??

6. Getting Customers to Complain
 The British Airways Experience
 The Problem
 Some Responses

7. The “Complaint Iceberg”
at British Airways.
8%
23%
69%
Don’t talk to Anyone
Talk to nearest BA Employee
Talk to Customer Relations Rep
THE KNOWN WATERLINE
To put this into perspective:
An opportunity occurs somewhere on the network every 15 seconds.
Potential Revenue Lost
(Millions)
£ 47
£ 141
£ 423

8. The Complaint Escalation Pyramid
The pyramid described in
numbers
The Complaint Process Stated in
Percentages
Vice
President
Middle
Management
Frontline
Service
Providers
1 Complaint =
2 Customers dissatisfied at middle
management level =
10 who complain to middle
management =
50 Customers who remain dissatisfied
after frontline effort =
200 who complain to front line =
500 who are dissatisfied =
One in two of these still
dissatisfied complain
25% of complainants still
dissatisfied
One in five complain
25% of these customers still
dissatisfied =
40% Complain =
100% of dissatisfied customers =

9. Next Topic
 Doing It Right the First and Second Time
 Getting Customers to Complain
 External and Internal Service Contracting
 Service Guarantees
 Service Recovery
 Questions for Management
 End with Questions??

10. External and Internal Service
Contracting
 Customer Service Contracting
 Internal Service Contracting
 Supplier Service Contracting

11. External and Internal Service
Contracting
 Customer Service Contracting
 Serve as a device for:
 Improving customer satisfaction
 Internal operations
 Supplier performance

12. External and Internal Service
Contracting
 Internal Service Contracting
 Serve as a device for internal departments:
1) Which other departments in the organization
are our most important customer’s?
2) What are their needs and our current
performance?
3) What is the gap between their needs and our
current performance?
4) What are the costs and payoffs of closing the
gap?

13. External and Internal Service
Contracting
 Supplier Service Contracting
 ISO 9000 is a quality program that suppliers
are required to have in order to supply clients
that have achieved this certificate of quality.
 Has led to a demand for service guarantees.

14. Next Topic
 Doing It Right the First and Second Time
 Getting Customers to Complain
 External and Internal Service Contracting
 Service Guarantees
 Service Recovery
 Questions for Management
 End with Questions??

15. Service Guarantees
 Questions in Guarantee Design
 What’s the Primary Purpose
 Internal Guarantees
 Impact on Suppliers
 The Economic of Service Guarantees
 Putting Guarantees in Context

16. Putting Guarantees in ContextCustomerSatisfactionSurveyRatings
Service Guarantees Invoked
Few Many
Low
High
Celebrate
Performance
Send help
Change
Management
SCATTER DIAGRAM OF UNIT PERFORMANCE

17. Next Topic
 Doing It Right the First and Second Time
 Getting Customers to Complain
 External and Internal Service Contracting
 Service Guarantees
 Service Recovery
 Questions for Management
 End with Questions??

18. Service Recovery
 A Case for Capability
 The service recovery needs to take place at
the frontline.
 Fast
 Customized
 Personalized

19. Service Recovery
 The British Airway method
 Convince all customer-contact personnel that
customers were to be trusted and that the
airlines wished to retain their business.
 Give the customer an Apology.
 To be asked what they wanted as a solution.
 A quick resolution of the complaint.
 Assurance that the problem was being fixed.
 Solutions by CareLine phone calls if possible.

20. The Service Recovery Payoff
Non complainants
Complaints Not Resolved
Complaints Resolved
Complaints Resolved
Quickly
How many of your unhappy customers will buy from you again?
Minor
Complaints
($1-5 losses)
Major
Complaints
(over $100
losses)
Percent of customers that will buy from you again.
9%
37%
19%
46%
54%
70%
82%
95%
Dissatisfied Customers’ Repurchase Intentions under Various Conditions

21. Next Topic
 Doing It Right the First and Second Time
 Getting Customers to Complain
 External and Internal Service Contracting
 Service Guarantees
 Service Recovery
 Questions for Management
 End with Questions??

22. Questions for Management
 What is the rate at which dissatisfied
customers complain about your products or
services? How do you know?
 How are complaints encouraged by your
organization? What kind of incentives are
provided to customers to complain?

23. Questions for Management
 Are a majority of customer complaints made
to representatives of the organization who
can do something about them? If not, what
has to be done to insure that this is the case?
 Are the reactions of dissatisfied customers
assembled in one data base (a consolidated
“listening post”) for management information,
planning, and longer term action?

24. Questions for Management
 Based on information from dissatisfied
customers, what is the potential for
renegotiating agreements both across
relevant departments of your organization
and with “supply chain” partners?
 What does fast, personalized, customized
recovery mean in your business? What has
to be done to achieve it in your organization?

25. Questions for Management
 To what extent has service contracting been
employed within the organization and with
other organizations in the supply chain?
 How would a service guarantee help your
organization elicit complaints, provide an
incentive for effective service recovery, and
service as a vehicle for improving service
operations?

26. Questions??
 References:
 James L. Heskett, W. Earl Sasser Jr, Leonard
A. Schlesinger, The Service Profit Chain, pp.
175 -197 (The Free Press) ,