Influence of Hesketts Service Profit Chain

This in turn helps the managers to build customer satisfaction and loyalty and then determine its impact on profitability and growth.Services are intangible and hence service quality is a growing concern in every industry. In the service sector, customer satisfaction is a critical variable and management theorists call this the service profit chain. The service profit chain implies that satisfied and motivated employees produce satisfied customers and satisfied customers translate into higher revenues and profits for the organization. Heskett et al., define the service profit chain as ‘involving direct and strong relationships between profit. growth. customer loyalty. customer satisfaction. the value of goods and services delivered to customers. and employee capability, satisfaction, loyalty and productivity’ (Gelade Young, 2005). If the service profit chains are carefully interpreted and adapted to suit an organization’s situation, the outcome can be remarkable. The service profit chain can have considerable influence in management circles. It influences decisions of investments to develop service and satisfaction levels. It is important to understand the implication it has in different industries and under different circumstances.The service profit chain demonstrates the link between each factor. Profit and growth are stimulated by customer loyalty and customer loyalty is a direct outcome of customer satisfaction. Satisfaction is influenced by the value of service created and value in turn is created by satisfied, loyal, and productive employees. Employee satisfaction results from support services that enable employees to deliver service to the customers. The service profit chain is a private sector model with desired goals derivations of financial motivation: increased turnover, higher profits, or more customers (Davis, 2006). The service profit chain revealed that organizations that wish to be successful in financial terms should not focus on profits.