What is the Service-Profit Chain?

Businesses are always trying to figure out the connection between their satisfaction and loyalty, efforts and profit. Numerous studies have shown different styles of relationships when it comes to what creates revenue. Some research has shown a very strong relationship between various satisfaction scores, loyalty and revenue.

Others have shown completely different connections. An article titled “Putting the Service Profit Chain to Work” offers their own connection between what scores contribute directly to revenue. They put their theory into the following order, which they refer to as the “Service Profit Chain.”

According to the article, the service profit chain has a fairly straight forward cause/effect order, which contributes directly to revenue. The service profit chain is as follows: Level 1: Employee Support and Enabling Policies At the top of the chain is the idea of services, reward programs, policies, etc. that benefit the employee and lead to a stronger workplace. Level 2: Employee Satisfaction Employee satisfaction is believed to directly relate to the employee support and rewards offered by the company.

Level 3: Productive Employees It is believed, according to the article, that the higher the employee satisfaction is within the company, the more likely the employees are going to deliver results that go above and beyond those with low productivity scores. Level 4: Service Value The next step down the chain is the idea that productive, happy employees will also deliver products and services that will bring value to the customers. In other words, whether it is in the quality of the product or the friendliness of the service, satisfied employees will be more valuable to the customer.

Level 5: Customer Satisfaction Because the company is offering value, the customers are far more satisfied with the company, leading to high customer satisfaction scores . Level 6: Customer Loyalty Satisfied customers are going to be those that keep coming back, because they grow loyal to the company, its products, and its employees. Level 7: Profit/Revenue Finally, the last step in the chain, the loyal and satisfied customers will lead to company profits.

There are several things to gleam from the ideas outlined in the article. First, it emphasizes that every part of the chain is important. So if employees are satisfied but not productive, then it will not lead to value, which will not lead to satisfaction and so on. Second, it discusses a direct relationship within the chain – each level leads to the next level, with each step pre-determined.