World Class “Customer Engagement” Practices comes to your doorstep

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Understanding and Managing the Service Profit Chain

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What is the objective of the business?

Creation of WealthFor Whom

Employees? Shareholders?

Customers / Society?

Ok, let’s agree it is for shareholders.

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How is Wealth Created?

By transforming the resourcesMen, Money, Technology, Raw Materials

Into something that customer’s“VALUE”

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What is Value?

Economic Definition:

Economic Value =Reference Value + Differentiation Value (price of best alternative) (difference +ve/-ve with best

alternative)

Consumer Value = Rational + Emotional benefits Price (Financial + Physical and emotional efforts

to acquire and consume products)

Summing up:

The difference between the cost of your product or service and what the consumer is willing to pay.

Value is always what is attributed by the customer

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How is Value processed by Consumers

Psychological DimensionReassurance / Status /

Trust/Affection

Economic DimensionPrice Perception

(Cheap, Expensive and Fair)

Functional DimensionFeatures Offered (Relevant

/irrelevant)

While the bottom two relate to the core product ,the upper dimension mostly comes from services facilitating the core product

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How do Firms Deliver Value?

CustomizationMass customization of products / processes / communication for affinity groups

(Consumer experience Life cycle management)

StandardizationMass productionMass Advertising

InnovationNewer & better product features

Innovation / Standardization StaccatoCustomization Contiguous

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What creates Attachments / Affinity?

Quality of experience –Good / Bad, Indifferent

Depth of experience – Degree to which expectations were exceeded either way

Memorability – Driven by the extent to which all 5 senses were engaged

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What is Experience?

Operational Excellence + Customer intimacy

Expectation

To experience is to feel.

Customer Experience =

Expectation is key determinant of the impact of the experience being delivered

Through a sum total of our interactions a customer has with a firm’s…

How do firms deliver Experience?

People + Process + Products + Physical / Virtual Environment

• Enablement• Orientation• Professional

Acumen• Role clarity

• Customer facing

• Backend TAT’s

• Escalation matrix

• Technology enablement

• Tangible• Intangible

• Physical areas• Virtual areas• Where customers

transaction encompasses every channel of contact

• All Customer engagement processes are driven by people.

• Physical environment maintained by people.

• All things being equal people the only differentiator.

• All things being unequal people the only leveler.

Key Dimensions of Experience

TANGIBLES• The appearance of physical facilities, equipment,

personnel and information material/meets exceeds standards in terms of features/quality

RELIABILITY• The ability to perform the service accurately and

dependably/ both in routine as well as exceptional circumstances

RESPONSIVENESS• The willingness to help customers and provide a

prompt service/responding in the emotions/feelings to people & events

Key Dimensions of Experience

ASSURANCE• Competence - having the requisite skills and knowledge• Courtesy - politeness, respect, consideration and friendliness of

contact staff• Credibility - trustworthiness, believability and honesty of staff• Security - freedom from danger, risk or doubt

EMPATHY • Access (physical and social) - approachability and ease of contact• Communication - keeping customers informed in a language they

understand and really listening to them• Understanding the customer - making the effort to get to know

customers and their specific need

My People Matter

• People are the only continuous &

unique difference between

organisation as we are all unique

• This display varying degrees of

customer centricity i.e. tendency

to enable vs. seek to be enabled

• Customers always blame people

for anything good or bad that

happens to them.

Customer centricity is the practice of putting customer first in everything the

individual does and organising all the activities around the basic objective of

delivering superior customer Service and Value.

Service Provider Attributes Customer’s Views Weight age( %)

Reliability Reliability 32 %

Basic Respect, Resourcefulness, Professional Acumen Assurance 19 %

People Orientation, Customer 1st Mindset Empathy 16 %

Personalised Responsiveness, Positive Outlook Responsiveness 22 %

Product + Place Tangibles 11 %

Defining & Measuring Customer Centricity

What catalyses Customer Centricity

• Customer centric people

• Level to which they feel “Engaged”

What is Engagement?

Engagement connotes “activation”

Trait Engagement State Engagement Behavioral Engagement

• Driven by an inclination to experience the world from a particular viewpoint – Optimistic / Pessimistic view of life

• Reflected in energy & enthusiasm

• Influenced by nature of work

• Willingness to make “discretionary effort

• Organisational citizenship behaviour

• Influenced by trust arising out of the quality of leadership

What are the conditions of Engagement?SA

FETY

• Employees must feel safe to be truly engaged

FAIR

NES

S

• Distributive Fairness: How rewards are distributive

• Interactional Fairness: How interpersonal roles are played out

• Procedural Fairness: How processes that impact people get carried out

DEG

REE

OF

SELF

DET

ERM

INAT

ION • Availability of

resources to do the job well & a sense of psychological empowerment

Understanding Customers’ Expectation?

• The expectation norms are pretty much the same for both B2B & B2C customers

• Customer expect service basics i.e. fundamentals to be right

• Customers link expectations to price being paid

• Customers expect companies to play “fair”

• Reliability is the most important dimension in meeting expectations

• The process dimension of empathy/Assurance & Responsiveness are more

important for exceeding expectations

• Customer expectations operate in a zone of tolerance namely from “adequate” to

“desired”.

Are the customers expectations reasonable? Do they need to be managed?

Un-anticipated

Desired

Expected

Basic

Need to uncover both rational and emotional expectations

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Service Profit Link

Customer centric people Empowered and engaged

Spirit of service Engaged customer

Enhanced life time value Minimization of cost to serve and acquire

Profit and value maximization

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Challenges towards making the Service Profit Chain a Reality

• Top Management Mindset

• Silo mindset – micro organization

− Presence of multiple silos and not just one as is commonly understood

− Silos between the multiple customer contact channels

− Silos between front and back end of functional department

− Silos between the different functions department

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Challenges towards making the Service Profit Chain a Reality

Expected Service vs Perceived Service

Service Quality Gap

Mismatch between management perception of expected service Translation of management perception of expected service into service

standards Variance between standards and delivery

Word of Mouth Personal Needs Past Experience

Sales & Marketing Communication

Service Quality Gap Defined

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Management Mindset

Strategy Mindset Organisation Behaviour Likely ResultsSeen as short term. Don't trust either customers or staff Customers buy on price & availability

Not seen as necessary Make no exceptionStaff stay based on salary levels - low engagement

Organisation first, customer second Organization operates as a commodity Short terms focus, guidelines

Required because competitors are offering it

Limited empowerment to staffRepeat business mainly due to customer inertia

Seen as a cost, rather than marketing investment

Do only what is necesssary to hold customers

Organization operates as a commodity

Concerns primarily with reacting to customer problems

Strategic measure to develop business

Exceed customer expectations High level of repeat business

Adequate staff empowerment Positive engagement with companyCreate Customer Delight

Seen as the brand in actionBrand pormise reflected in policies & procedures

Customers as brand advocates

Tailored brand education for everyone Engaged and empowered staffIncreased brand equity & higher profits

CE as an Expression of

the Brand

CE as a cost

CEas a necessity

CE as a Competititive

Advantage

Significance of Customer Experience

Inappropriate management mindset is a major hindrance

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Enablers of The Service Profit Chain

• Free flow of information across organisation levels both

informally & through formal platform

• Audit of data capture mechanism and nomenclature

• Cross-verification of qualitative inputs and external research

• Process blue printing

• Process fail-safing

• Service recovery procedures

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Enablers of the Service Profit Chain

• Hiring of customer centric team members

• Mystery audits of all customer facing processes– Frontlining

– VoC Forums

– CSaT

– ESaT

– Service TATs

• Escalation Mechanism

• Service guarantees

• Price of non-conformance

• Company Wide CSAT linked bonus

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Audit of the Service Profit Chain

• Net Cost to acquire

• Cost to secure

• Ration of companies to revenue

• Customer attrition rates

• Portfolio of attrited customers

• Quality of referrals

• Average Lifetime value

• Active to dormant customer ratio

• Nett promoter score

• CSAT score

• Employee attrition rate

• Sales and margin contribution per employee

• ESAT scores

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Acknowledgements

• James Heskett, Earl Sasser & Leonard Schlesinger- Harvard Business

School

• Janelle Barlow-TMI America

• Dr. Deepak Jain- Dean-Insead

• Bruce Temkin- Temkin Group

• Dr. Fred Webster Jr.- Tuck School of Business

• Dr. Benjamim Schneider

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