Going through my notes in search of something else I found this. Short sweet and to the point it is the clearest resume of what we try to help companies create every day.
The impact of the service-profit chain
By Rebecca Hyde
Want to increase your profit and market share? Well, the first thing you need to do is forget about both – that’s according to The Harvard Business Review. A recent report from this eminent business school advises that in a service economy, customers and frontline workers should be your first priority.
No one disputes that profit margin and market share are crucial to the survival of your business, especially in the current climate, but the Harvard boys have got a point. To excel in a service industry your customers’ satisfaction must be your number one concern, hotly pursued by the happiness of your frontline workers. Sounds a bit too New Age for you? Then consider for a moment the lifetime value of a customer – add the value of repeat purchases of related products and referrals and now you’re getting the picture!
Few can dispute that happy staff are more productive, a fact which is fundamental when it comes to sales staff – who wants to deal with a surly customer services rep? Harvard’s research has directly linked employee satisfaction with customer satisfaction (OK, so it’s not rocket science…) and suddenly you can see the impact of the Service Profit Chain.
Customer loyalty, which only comes from “very satisfied” customers as opposed to merely “satisfied” customers, can do wonderful things to your bottom line. A 5% increase in customer loyalty can boost your profits by 25%-85! So how do you ensure that your customers remain very satisfied? By adding value, the cost of which will be more than covered by the increased profits they will produce. Adding value can be as simple as offering a watertight guarantee on your services or a simple after sales follow up call.
Employee loyalty drives productivity which drives value which drives your profit through the roof! Remember that by ensuring that your staff is nurtured and content you will not only gain an increase in immediate productivity, you are also less likely to lose staff. It’s common knowledge how much it costs to recruit staff but when you factor in the cost of lost revenue while you recruit and while your new employee begins his learning curve – you can see that investing time and energy in your staff is a profitable exercise!
Service workers are happiest when they are empowered to make their customers happy. This adds value to their job leaving both the employee and the customer satisfied which, as we know, will keep the CEO satisfied with his bottom line. By adding this responsibility to their role, frontline staff discover added depth to their work, keeping them interested in the challenge of their job longer.