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What do you need to focus on if you in order to create a dream team?

April 13, 2022By Mike Hohnen

In my view, the three cornerstones in the thinking behind the concept of the Service Profit Chain are:

Customer Loyalty – as the key objective
Value – understanding the true need of the customer
Dream Team – the people that actually make it happen

We have already looked at Loyalty and Value in the previous post.

In this post, I would like to explain the 6 key ingredients in creating a dream team:

The Right People

Careful selection of new recruits. Hire for attitude. Train for skills. Coach for performance and that includes dealing with the bad apples.

Continuous Improvement

Best in class training and development at all levels in the organization. Continuous improvement is considered one of the great benefits of the job. “In this job, I grow”…

Great Support Systems

Service is not just something the frontline does for our customers. Service is our culture. Employees and managers, who do not have customer contact, service the employees that do. (Our IT department is not the IT-Police – it is an internal service department that supports the frontline in getting the job done.)

Empowerment/autonomy

The best service employees take pride in solving the problem on the spot. So the freedom to act is hugely motivating. Southwest Airlines famously tells its employees, ”You may do anything you are not uncomfortable doing to solve a passenger’s problem.”

Clear Expectations

In the same way, that anyone who has made it to a great sports team knows what is expected of them, employees in the best service organisations also know what is expected of them. It is part of their motivation to be part of a team that is not afraid to set the bar high. Candour is a key element of high-performing teams.

Appropriate Rewards and Recognition

Focusing on what works, celebrating success, and acknowledging each other’s contributions makes work meaningful.

The principles are not complicated. There is no magic involved. But it requires commitment and persistence to get it right. When you do, the benefits are amazing.

You can download the Dream Team checklist below and benchmark yourself!

Dream Team Questions

1 file(s) 1.46 MB

Download

This blog post is part of a series of answers to frequent questions that I get around the concept of the Service Profit Chain. In future’s posts, we will continue to explore other key points. If you would like the full concept served up in one go, you will find Mike’s book “Best! No need to be cheap if…” HERE.

How is customer value created? And who does it?

April 13, 2022By Mike Hohnen

Service

In a previous question, we looked at what value is to a customer, how they calculate it in their mind if they received value or not. In this post, we will look at how and by whom is the value then created?

If we go back to the basic definition of service, then we know that Service = Result – Experience.

The experience part is relatively straightforward. We need to provide a good experience at all the touch points and most reasonably successful service organisations understand that.

We can get back to how to do this in a future post. But what truly separates the great from the good is their understating of the result bit.

If I walk in to a store to purchase a hammer of a certain size and make, and I leave the store with exactly that hammer then it is relatively easy. My primary result was to purchase a hammer and that is what I did.

But what is the result that I am looking for when I have a two hour layover in an airport? Or what is the result that I am looking for when I as the CEO organises an offsite meeting for my top ten managers at a conference center? What is the result I am looking for when I check in to a hotel?

The mediocre service providers assume that it is the primary product that is the result. The bed to sleep in. A conference room with a projector etc. But that is not the point. The hotel bed is the solution to a need, and the need may be a good night sleep. The conference room is the solution to a need that could be about undisturbed workspace with no distractions.

When I say ‘could be’, it is because we can’t be sure. Most of these service needs are highly subjective and individual.

So we have two choices. We can give everybody the standard solution and hope that it covers some or most of their needs. Or we can take pride in discovering what the real result is that they are looking for and deliver a customised solution.

When I explain this during my Service Profit Chain seminars, I often hear grows of protest at this idea: “But we don’t know. How on earth should we know what the need behind a conference room booking is other than they obviously want a conference room? We have hundreds of guests each day, how are we to understand what each and everyone’s different needs are. How are we going to do that?”

It quite simple: Ask!

Initiate a conversation that tries to explore and uncover what the need is behind the request for a product. Just like your doctor does. You don’t go to your doctor and say hey could you give me a box of the blue pills, they were wonderful last time. No, your doctor will investigate, and question and use his intuition and experience in order to determine what he thinks is the real need. Once that is identified, he prescribes the best product to solve the need.

That is exactly what our best service providers do as well. What makes them outstanding at their craft is that they investigate, question and use their experience and intuition in order to understand what the real need is. Once they understand that, then they use their professional expertise and knowledge of their product to propose the best possible solution to exactly that need. And funnily enough, that always creates an exceptionally happy customer. Go figure.

If it is a complex service delivery then it requires a lot of time and effort. If it is a simple service delivery, it’s easier to do. Here is a simple example:
Two people come into our restaurant and ask for a table for two. Seated, we give them the menu and let them know we will be back shortly. We come back. They order. Food arrives. They eat, pay and bye bye. Standard solution, that was the product the client asked for. they were not unhappy you could claim.

Let’s rewind.

Two people come into our restaurant and ask for a table for two. Seated, we give them the menu and ask so have you been here before? Their answer will give us valuable information about what’s next to say (Do they need help in understanding our restaurant concept / menu or do they know it well and need help to learn about new initiatives specials etc.?)

Then, we ask casually: So you look really happy tonight are you celebrating something? With a bit of luck, we get some really valuable information back:
a) Oh no we just escaped from the kids and we are off to a movie (Meaning they are on a limited timeframe and we need to adapt to that.)
b) Yes we are actually. It’s my wife’s birthday today. (Meaning they are here for the evening and they would like it to be special somehow. Just sticking a flare in their dessert is already a much better experience than the standard solution we started with if you get my point.)

A skilled service provider will ensure that they not only have the evening they dreamed of but they will probably also spend more than they would have if we had not had this opportunity to really understand their need. The better we understand the more values we create.

And that brings me to favourite peeve. I am not mad about the expression ‘Up-sell’. It sounds like we are force feeding them more than they need. But I do encourage the service sale, which is the sale you make once you have understood that here is a deeper need than what was originally voiced by the customer. By letting them spend more on achieving their real need, you are giving them fantastic service.

So how is value created? By uncovering the true need: Understanding what is the real result they are looking for and then customising your delivery to fulfill that need in the best possible way.

This blog post is part of a series of answers to frequent questions that I get around the concept of the Service Profit Chain. In future post, we will continue to explore other key points. If you would like the full concept served up in one go, you will find Mike’s book “Best! No need to be cheap if…” HERE.

What is the difference between satisfaction and loyalty?

April 14, 2022By Mike Hohnen

Loyalty and Satisfaction

In a world of abundance, too much of everything, what we also sometimes describe as hyper-competition, understanding the difference between satisfaction and loyalty is also the key to profits and growth.

There are many different ways of defining loyalty out there but this is my favourite one (not one invented but I can’t for the life of me remember where I found it): A loyal customer is someone who is willing to pay a bit more for your service than they would have to pay somewhere else for a similar experience.

Think about that for a moment…

If they are paying the same price to you as they would pay anywhere else, they are not loyal. It is just convenient for them to do business with you. And if they are paying less, you have just bribed them to stay with you.

So there you have it, satisfaction is manly about avoiding dissatisfaction: Delivering on the primary results in a consistent and reliable way, what Tom Peters so famously called Ho-Hum.

There is no loyalty in satisfaction. It is just Ho-Hum.

Loyalty is about a connection. Loyalty is emotional, not rational. Loyalty is Wow! You have this ‘feeling’ about a place, a product.

Just think about all the stuff that you own. Of all the things in your possession, which ones are in your eyes brands and what are just products?

It’s quite simple: A product or service becomes a brand when you have a feeling for it.

And then we are back full circle to the Service Profit Chain because things do not create emotions, people do. When I think of a certain hotel or café that I am very fond of, it’s the people. They have some people who have made an effort and established a connection with me, and yes I will gladly pay a premium for that emotional connection. It makes my day.

What is value to a customer?

August 17, 2020By Mike Hohnen

Or, Why Value Is Not about Money.

In the old economy, the one dominated by goods, value was created through the transfer of ownership. I create or produce something; and when I transfer the ownership to you, you give me money in return. The way you check the value of what you bought has to do with the specifications. Whether you are looking for strawberries or a new car, it is about product attributes. This ‘widget’ is _______ (stronger, faster, slimmer, tastier…) than the other ones you have looked at.

In the new economy, the service economy, value is created in use.
When I rent a car, use a consultant, or search for a great place to stay for my vacation, there is no transfer of ownership. It is all about utility – I need something, and my preferred service is the one that best takes care of that need. When my need is met, it translates into a result for me. And most of us are more than happy to pay for getting the result we need.

So, if our aim is to create a great customer service experience, the starting point is to make sure that what we are offering matches the value expectation of the customer.

In order to do that, we use the Value Equation – a tool that originates from the research conducted to produce the Service Profit Chain framework. The Value Equation has four elements:

R Is for Result.

What is the result that the client is expecting or looking for? Do we understand the need? If I buy an airline ticket from Paris to Rome, and we end up in Berlin, the airline did not deliver the result that I was expecting. So, no matter how cheap the ticket is or how many drinks they serve, it is a lousy service experience. Do you book a table in a restaurant because you are hungry? Maybe. More often, you have a different need. Maybe you are looking for a special moment, an occasion to celebrate or an ideal setting for a special conversation. Whatever it is, the food is just an instrument in providing the real result that you are looking for.

This means that for every service product we create, we need to ask ourselves, “What is the result they are looking for?”

P Is for Process.
You can fly from A to B with many different airlines. In general, they will all get you to where you planned to go; but each one does it their way. The difference comes out in their process.

From a customer’s point-of-view, process has five elements. Each plays a part when evaluating to what extent the value proposition actually covered their needs.

Time: How does time play into the need or result that they have? Is it important that we are on time? Is it important that we are fast or slow? If my wife and I are having dinner before the cinema, we are looking for one kind of time experience. If we are celebrating her birthday the following week, we are looking for a different kind of time experience. Same people, same restaurant, but different situations.

Reliability: Do we do what we say we will do? Are we consistent?

Competence: How does the customer experience the competence level of our employee at a given touch point? How well do our frontline teams respond when asked a question or a request for help?

Empathy: To what extent are our employees able to see the situation from the client’s point-of-view? When a customer feels understood, we are more than halfway to solving their needs.

Proof of service: Do we provide a service that the client does not notice? Are there ways that we could remind the client that we are servicing them?

Under the fraction line we have:
$ for price and E for effort: The client pays a price for our service; but depending on the service package, they also put in more or less effort themselves. If you buy a sofa from IKEA, the price is low; but you put in quite a bit of effort yourself. If you fly Virgin Upper Class, they will pick you up at your office and take you and your stuff right to the plane; A different experience than flying Ryanair, and, to be fair, also at a different price point.

So, there you have it.
If you want to understand how customers perceive value, the value equation is your key. And, your starting point for developing a great customer experience is to understand how you tailor your customer value proposition to each segment using the Value Equation.

I would be happy to send you a copy of the Value equation at a glance – just fill in your email below.

What do you mean by service?

April 13, 2022By Mike Hohnen

It’s a word we use all the time: “Went to the coffee house yesterday, great service!” Or “Our local post office just has the worst service.”

In order to really benefit from the thinking behind the concept of the Service Profit Chain, we need to be clear about what we mean when we say service. Because it is sort of implicitly understood from the term Service Profit Chain that there is a connection: Great service leads to great profits. And that is true. That is the whole point.

So let’s take a look at what we mean when we say: service

If you go to the literature, there are various ways you can define service – my preferred one is this one:

When we use this definition, we see that service is so much more than just a robotic: “Have nice day”.

In fact, there is no notion of service if the guest or customer has not achieved their primary result (We will look more at this when we get to the questions on how we create value).

So when I go to my favourite coffee house with this craving for a really leeker flat white and they serve what I would describe as wishy-washy latte, then it does not help that they smile, play smooth music and are sweet and all that good stuff. I did not achieve my primary result and that is really bad service. As a consequence, I will find a different coffee shop that does know how to make a smooth velvety flat white with a kick.

In the same way, it is not much better if they serve a perfect flat white, but do it in a rude way. On top of that, the tables are not cleared and the toilet is disgusting. That is also terrible service – and I won’t be back because the experience did not live up to my expectations despite the coffee.

So in order for service to happen, both need to be in place. The result needs to live up to or exceed our expectations and ALL the experience touch-points from entering the store till leaving it again (and all that happens in between) need to be great. When that happens, we tell our friends: “Have you tried the new coffee house down the road? The service is amazing!” That is when service becomes the foundation for profits and growth. But let’s be honest, it is quite hard to do consistently.

And why is that?

Well just think of how many different results could someone be looking for when they enter a coffee shop. My example above was easy. I focused on the quality of the core product – the coffee. But lots of guest in a coffee house don’t go there for the coffee, they go there for … ( Company, workspace, kill some time, feeling cold) you fill in the blank. The list is endless.

And a coffee house is a relatively simple service, think of a theme park, then it gets really complex

We live in an era of mass customisation. As service providers, we need to understand and adapt to the result expectation that each customer has, otherwise it is not service – in their eyes…

This is why products and services are so different. Products you sell on their specification – it’s about the product. It’s within your control. Services are about a need. Their needs. And you don’t necessarily understand what it is. First you need to decode it – and that means it’s all about them.

So we are back to my favourite subject.

Great service is produced by frontline employees who are able (and willing) to empathise with their customers – to read them and understand the result they are looking for – that is when service becomes an art form.

So how do we achieve that? We implement the concept of the Service Profit Chain as a strategic way of understanding the business we are in.

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Why the Service Profit Chain concept is more important now than ever before?

April 13, 2022By Mike Hohnen

Service Business

Check out Google trends, the interest in customer service and customer experience is steadily rising year by year and has been for the past 5 years.

Why?

Because we live in an age of abundance – this is one of my key points when I give live presentations. By abundance I mean that there is too much of everything. There are more hotel rooms, restaurant seats, cars for hire or consultants etc. than the market actually needs. So we are all trying to survive in a hyper-competitive environment.

In a hyper-competitive environment, it is not enough to try and compete on product specifications. Because within a given price bracket, the specifications for most product are more or less identical. So in order to differentiate, we need to look at the experience and that typically means that we add some service components.

On top of that, we are rapidly moving away from products and into services (Just think cars, in a few years when cars become self driving, they will no longer be products but we will see them as a service). So society is moving to service dominant logic. And when products are turned into services, the focus shifts, it is not about the product spec but the customer need.

If we want to compete on experience and service, we need to focus on the interaction between the frontline staff and the guest/customer – what we also call the touch points. That is the critical interface – that interaction can lift what is otherwise just a bland run of the mill experience into a memorable experience. And when that happens, we create loyalty. High customer loyalty is the key profits a growth.

So some companies launch major initiatives around creating loyalty. They see that as their main objective.

But that is only because they are not paying attention to the principles of the Service Profit Chain – in a sense they have got the wrong end of the stick.

There is no shortcut to the profits and growth. You need to take the long haul and that starts with creating an inspiring and engaging workplace, and that is what the concept of the Service Profit Chain can help you do – and that is why understanding this key framework is the best way to survive in a hyper competitive environment.

Check our my course The Service Profit Chain explained!

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Are you a Service Profit Chain champion?

February 5, 2019By Mike Hohnen

Today is the first day in the rest of this year. How are you going to put the future to good use?

If you are in the service industry, I am sure that you are focused on how to do an even better job building customer loyalty. The key to profit and growth is customer loyalty that has been well documented with the principles of the Service Profit Chain (if you have never heard of this concept you can learn more here).

But the real challenge is not knowing, is it? — The hard part is the doing.

Just knowing about the Service Profit Chain is not going to get you to where you need to be this year – you need to actually also do it. So what are the areas for improvement in your business? Do you know?

Because in order for you to improve, you need to identify the gap – I have covered that in a previous post – so here is a short little quiz for you to start thinking about where are the gaps.

The questions will help you see what you need to focus on during the next 90 days.

Have fun and I hope that this year will turn out to be wonderful and productive year for you.

[watupro 1]

Why my fear of roller coasters does not keep me out of amusement parks

April 13, 2022By Mike Hohnen

Helix - Liseberg - Gothenburg — *Helix – Liseberg – Gothenburg*

They scare the living daylight out of me those roller coasters.

Intellectually I understand that they are safe, probably safer that taking a taxi to the airport, statistically… but still. It’s always been like that, so maybe in a previous life I was traumatised by a roller coaster gone wild. Anyway that is not the point of this final blog post of the year. The reason I mention it is because paradoxically this year I have seen more incredible roller coasters and heard more delighted shrieks from thrilled crowds than at any time previously in my life. More on that in just a minute.

Yes I am in a reflective mood.

You see, technically, this week is just like all the other weeks, but somehow in our mind it’s quite special. It marks an ending and a new beginning and we all get in this mood of yearly review and even more importantly setting new bold goals for the coming year.

All my lovely blogging colleagues are probably bombarding you with: The ten best books you should have read, the eight new trends that you must understand or (flavour of the year) the twelve point action plan that will make this your best year ever!

So why the roller coasters?

Well believe it or not, this was the year that I got to spend considerable time in amusements parks!

Seriously!

As always I have been doing work with my loyal gang of regular hotel clients, but I also got to spend time at Efteling in Holland introducing the Service Profit Chain for IAAPA. In Copenhagen, we introduced a new approach to leadership development at Tivoli gardens and I had the honour for 16 weeks to take a group of seriously enthusiastic managers from Liseberg in Gothenburg through the GROW leadership program.

So what am I learning?

I think my key takeaway this year has been confirmation that at the end of the day, being a great manager is deceptively simple on the surface, and incredibly hard to do well in practice. It’s like juggling. You see the guy rotating 5 oranges in the air and you think: “That’s neat. I can do that.” You pick up the oranges and you understand that there is a gap between knowing and doing.

The 5 oranges of management that you need to juggle have been elegantly formulated by the Gallup organisation based on their extensive research of hundreds of business and managers.

Great managers have these talents/skills/abilities:

They motivate every single employee to take action and engage them with a compelling mission and vision.
They have the assertiveness to drive outcomes and the ability to overcome adversity and resistance.
They create a culture of clear accountability.
They build relationships that create trust, open dialogue, and full transparency.
They make decisions that are based on productivity, not politics.

That’s it! But again this is just more information, and I am sure you don’t need more information.

What you need is probably execution, the HOW part.

So that brings me to next year. Early 2017, we will be launched the Team Leader’s Toolbox – a training program aimed at helping busy mangers learn quickly how they juggle their ‘oranges’.

We have been exploring this theme of Leadership and Management over the year on the blog as well and if you missed some of the posts you can download a compilation in the form of ebook HERE.

Thank you for reading my blog. If there is anything you would like to see more (or less) of next year, don’t hesitate to drop me a line. I love hearing from my readers.

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This post is one of a series where we are exploring the notion of leadership and how this is different from management. Our starting point is the Service Profit Chain and the understating that the management part of our job will only take us so far. If we really want to create an organisation that is capable of delivering outstanding customer experiences, we need to develop an organisation that delivers outstanding employee experiences – and that requires leadership. You can check out other articles of the series below: