PEOPLE, SERVICE, SUCCESSNotes to accompany our viewing of these Harvard video

tapesAuthors: James Heskett, Earl Sasser & Leonard

Schlesinger

THE SERVICE PROFIT CHAIN

EMPLOYEE SATISFACTION

& LOYALTY

SERVICE VALUE

CUSTOMER SATISFACTION

&LOYALTY

PROFIT &

GROWTH

THE SERVICE PROFIT CHAIN STARTS WITH PROFITS AND

GROWTH1. CUSTOMER LOYALTY IS WHAT LEADS TO HIGH LEVELS OF GROWTH AND PROFIT

2. HIGH LEVELS OF CUSTOMER SATISFACTION LEAD TO CUSTOMER LOYALTY

3. CUSTOMER SATISFACTION RESULTS FROM THE VALUE OF SERVICES DELIVERED vs. WHAT CUSTOMERS EXPECTED

4. EMPLOYEE LOYALTY, EFFECTIVENESS & SATISFACTION IS THE KEY TO SERVICE VALUE

SOME KEY THOUGHTS Treat problems like opportunities to build

customer relationships. The value in many traditional manufacturing

firms today comes from a combination of product and service.

How to get your front line workers to understand their impact on the business?

Xerox found that a very satisfied customer is 6x more willing to buy from you again vs. A satisfied customer.

If front line employees can’t manage themselves, there is no way you can have very satisfied customers.

BENEFITS OF QUALITY SERVICE

SALES GROWTH

17% 8%

HIGH LOW

PROFITABILITY

12 % 1%

HIGH LOW

Companies that provide high quality service have higher sales growth

and higher profitability.

BENEFITS OF QUALITY SERVICE

Growth in market share is significantly impacted by service

quality

+ 6 %

HIGH

- 2 %

LOW

QUALITY SERVICE PREVENTS CUSTOMER TURNOVER

Dissatisfied customers turnover eight times more than satisfied

customers

SATISFIED CUSTOMERS

DISSATISFIED CUSTOMERS

5 %

40%

REDUCING CUSTOMER DEFECTIONS

Reducing customer defection boosts profits 25% to 85% - based on average customer life

Source: Bain Consulting

85%

75%

BRANCH

DEPOSITSCREDIT CARDS

50%

INSURANCE BROKERAGE

35%

SOFTWARE

All these examples started by identifying customer

needs and then changing to meet customer needs!

What are the key lessons from Taco Bell? What are the key lessons from Citibank? What are the key lessons from Xerox?

APPLICATION AT MOBIL

How is Mobil applying these concepts in the retail business?

What are we trying to do to use these concepts in the service component of the refining business?

What can you do to apply these concepts to your change project or your work unit?

APPLICATION AT TCB

What are the key points of understanding we should take from this for TCB?

What word would you substitute for profits in this video, so it would better fit us? Why?

To get to the a very high level of sustainable quality, to provide outstanding service that is a competitive advantage, where are there the greatest tensions in TCB?

MOBILIZING PEOPLE FOR BREAKTHROUGH SERVICE

HIRING - Southwest Airlines Find the right people, with the right attitude Hire for things that can not be taught Be very selective, choose people based on what

makes your most successful people successful Truly use the first year as a probation period

TOOLS & TRAINING - Service Master Tailor unique tools to help people on your jobs Make sure people know the why of their work,

how they impact others. Treat people with dignity, help them learn and

grow

MOBILIZING PEOPLE FOR BREAKTHROUGH SERVICE

Management support Stay in touch with the front line, service

master requires execs to do front line jobs one day a year.

A leader should have servants heart Not let perks of office impact effectiveness Not afraid to take a back seat for

recognition Willing to do menial task to confirm the

importance of the mundane

KEY THOUGHTS A key to employee satisfaction is

their ability to deliver results to customers

People want to be able to help their customers

The single biggest factor impacting job satisfaction is the ability to meet customer needs, 75% of those who felt they were able to meet customer needs reported job satisfaction. Only 35% of those that did not feel they could meet customer needs were satisfied

KEY THOUGHTS Those not satisfied with their job are

three times as likely to turnover as those that are satisfied

Turnover negatively impacts customer satisfaction

Customers buy more from long term employees

The secret to a good service business is skilled employees that care

APPLICATION AT MOBIL What can we learn from Southwest

and Service Master?

How is Mobil applying these concepts in the retail business?

What are we trying to do to use these concepts in the service component of the refining business?

What can you do to apply these concepts to your change project or your work unit?

LISTENING TO YOUR CUSTOMERS Make listening to the customer a key

Keep the end user in the feedback loop

Establish listening posts at all customer interfaces

Train your people to be effective at interacting with the customers, have them gain customer information at all points of contact

Observe end users using the products or services

LISTENING TO YOUR CUSTOMERS

Create systems, access to information

Turn what you learn from customers into systems, so you can better meet customer needs in the future

Use this knowledge to create competitive advantage, e.g. Ritz-Carlton customer data

Keep listening to your customers because they change, and so do their needs

KEY THOUGHTS Listening provides the stimulus for change

Listening is the nutrition for your company

You can’t be customer focused if you don’t listen

Listening to your customers creates loyalty and increased word of mouth advertising

“Moments of truth” between employees and customer are your quality of service

Management has to listen to its employees, if it wants to reap the benefit of their listening

APPLICATION AT MOBIL What can we learn from the Ritz-

Carlton, Intuit, and MacIsaac? How is Mobil applying these concepts

in the retail business? What are we trying to do to use these

concepts in the service component of the refining business?

What can you do to apply these concepts to your change project or your work unit?

THE LIFETIME VALUE OF CUSTOMERS

Zero defections – MBNA America discovered that customers did not begin to become profitable until they were customers for 5 years Increased their customer retention rate from

the low 80’s to the high 90’s over 8 years & increased profitability 16 times

Needed to increase customer service dramatically to retain customers - measured 16 aspects of customer service

Get the right customers and keep them - their philosophy

Research - shows a strong relationship between customer retention and profitability for 5 companies in the credit business & no relationship between portfolio size and profitability

THE LIFETIME VALUE OF CUSTOMERS

Sewell calculated that people will buy 15-20 cars in their lifetime - they make sure their people know that

At Sewell service people build the bonds with customers, they are the ones that see the customer repeatedly

People satisfied with service will spread positive word of mouth and buy from you again

Operating costs are driven down by less need for advertising and the ability to succeed with a smaller sales force

In a tough economy in Dallas Sewell was able to triple in size

WHY CUSTOMERS ARE MORE PROFITABLE OVER TIME

0

10

20

30

40

50

60

70

YEAR

COMPANY PROFIT

PRICE PREMIUM

REFERRALS

REDUCED COSTS

INC PURCHASES

BASE

KEY THOUGHTS Customer loyalty is about the

economics of turning transactions into relationships

Train people to think of themselves as a customer

Measure customer satisfaction and tie it to bonus systems

Its systems, not just smiles - you have to be able to deliver if you want to retain customers

APPLICATION AT MOBIL What can we learn from the MBNA

America and Sewell Motor Company?

How is Mobil applying these concepts in the retail business?

What are we trying to do to use these concepts in the service component of the refining business?

What can you do to apply these concepts to your change project or your work unit?

SERVICE RECOVERY To use service recovery effectively you

must: Encourage, empower and train first line

employees Design speedy service recovery systems Learn from mistakes and improve basic services

The employee is the person on the spot when a customer has a problem, they must be empowered to fix the problem

Surveys by intuit after problem with quick books showed their customers felt better about them because of how they handled the large problem

British airways put in systems that allows it to respond to customer complaints rapidly

SERVICE RECOVERY Its important to improve how easy it is to

communicate with the company BA found that unhappy customers tell 10

others about their experience Happy customers will tell 9 others BA found that only 8% of customers with a

problem actually complain, 23% get problem resolved some other way and 69% get no satisfaction

BA calculated that a 1% increase in their knowledge of customer problems would result in 200,000 - 400,000 pounds of increased revenue a year

KEY THOUGHTS Recovery is how companies plan for the

inevitable mistakes that they will make If you learn from a mistake its an

opportunity to improve If you respond well to a problem, its a way

to wow the customer and increase customer retention and satisfaction levels

The first step in service recovery is saying I’m sorry

Employees must know how to handle difficult interactions with upset customers - training key

Do right by the customer - motto of intuit

APPLICATION AT MOBIL What can we learn from the Sewell Motor

Company, Intuit, MacIsaac, the Ritz Carlton and British Airways about service recovery?

How is Mobil applying these concepts in the retail business?

What are we trying to do to use these concepts in the service component of the refining business?

What can you do to apply these concepts to your change project or your work unit?