people, service, success notes to accompany our viewing of these harvard video tapes authors: james...
TRANSCRIPT
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?