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Contents Preface PART I: THE SERVICE PROFIT CHAIN A RATIONALE FOR EXCELLENCE 1. Setting the Record Straight A World of Misleading Advice Too Much Advice out of Context The Tyranny of the Tradeoff Emphasis on Symptoms vs. Causes The Trivialization of Service Fixation on Service Process Quality The Service Profit Chain and Our Search for Evidence Heskett and the Strategic Service Vision Sasser and Customer Loyalty Schlesinger and Determinants of Employee and Customer Loyalty The Service Profit Chain The Centrality of Value Quality as One Element of Value Price Results, Costs, Price, Value, and Profit Relationship to Service Profit Chain What Difference Does It Make? Spreading the Word 2. Capitalizing on the Service Profit Chain The Service Profit Chain Managing for Results at Southwest Airlines and American Express Profit and Growth Are Linked to Customer Loyalty Customer Loyalty Is Linked to Customer Customer Is Linked to Service Value Service Value Is Linked to Employee Productivity Employee Productivity Is Linked to Loyalty Employee Loyalty Is Linked to Employee Employee Is Linked to Internal Quality of Work Comprehensively Relating Links in the Chain Implications of the Service Profit Chain for Management Measuring Across Operating Units Communicating Results of the Self-Appraisal Developing a Designing Efforts to Enhance Performance Tying Recognition and Rewards to Measures Communicating Results Encouraging Internal Exchanges Questions for Management Getting on with the Job: An Important Caveat 3. Managing by the Customer Value Equation The Customer Value Equation Results Produced for Customers Process Quality Price and Acquisition Costs Customer Value Equation Relationships Managing by the Customer Value Equation: What It Requires USAA British Airways Requirements of Those Who Manage by the Customer Value Equation Linking the Strategic Service Vision and the Service Profit Chain Questions for Management PART II: BUILDING PROFIT CHAIN CAPABILITY 4. Rethinking Marketing: Building Customer Loyalty Defining the Marketing: Adding the Three Rs to the Four Ps Estimating the Lifetime Value of a Customer Retention Related Sales of New Products and Services Referrals Managing by the Three Rs Measuring and Communicating the Lifetime Value of Customers Identifying, Creating, and Enhancing Listening Posts Recognizing and Creating Incentives to Build Customer Loyalty Utilizing Customer Defections as Learning Opportunities Potential-Based Marketing Identifying Share of Loyal Customers Calculating Economic Impact of Customer Behavior Change Lengthening Customer Relationships Overall Impact of Potential-based Marketing Implementing a Potential-based Marketing Effort Mining Customer Data to Achieve Mass Customization Achieving Mass Customization on a Vertical Data base Achieving Mass Customization on a Horizontal Data base Organizational Implications of the New Marketing Questions for Management 5. Attaining Customer Satisfaction: Not Whether but When The Xerox The Customer Imperative Relationship of Customer and Loyalty Relationship of Customer and Profitability for Captive Customers The Importance of Focus The Tyranny of Averages Satisfying Targeted Segments The Ultimate Source of Focus: Affinity Groups Measuring Customer and Loyalty Customer Surveys Customer Feedback Marketing Research Feedback from Frontline Personnel Complementarity of Methods Addressing Customer at the Limits: Apostles and Terrorists The Economics of the Extreme Investing in Existing versus New Customers Creating Terrorists as a By-Product of Focus Meanwhile, Back at Xerox Questions for Management Understanding Determinants of Customer 6. Managing the Customer-Employee Satisfaction The Service Encounter Evidence of the Satisfaction Why the Mirror Occurs Preventing Cracks in the Mirror From Service Encounter to Relationship Factors Creating the Successful Service Encounter Achieving Consistency in Service Encounters Enlisting the Customer in Relationship Building Engineering an Organization for Customer Relationships Developing the Service Relationship Triangle Identifying Relationship-Critical Jobs Dedicated Servers or Not? Service Teams or Not? Questions for Management 7. Building a Cycle of Capability Frontline Frustration Capability Defined Hiring for Attitudes First, Skills Second The Bugs Burger Method Selection by Life Themes Substituting Self-Selection for Selection Involving Customers in the Process Serving Customers Who Qualify Designing Training as Both Ends and Means Providing Latitude and Limits The Traditional View The Nontraditional View Investing in Support Systems Information and Communication Technology Facilities Methods and Materials Field Quality Control Safety Nets Service Guarantees Latitude to Fire Customers Providing Consistent Reward and Recognition Fitting the Elements Together Questions for Management Concluding Comments 8. Developing Processes That Deliver Value Basic Tenets of Process Design That Yield Value The World's Best Hospital The World's Best Dinner Show Value America's First Deming Prize Winner Formation of Quality Improvement Teams Development of The Process Policy Deployment Quality in Daily Work Important Techniques for Process Improvement Service Mapping Pareto Analyses Cause-and-Effect (Fishbone) Diagramming Other Process Steps Translating Techniques into Results Value Enhancement versus Quality Improvement Process Questions for Management 9. Designing Service Delivery Systems That Drive Quality, Productivity, and Value Developing Single-Facility Service Delivery Systems Planning System Designs for the Right Amount of Employee Latitude Controlling Customer Behavior The Ultimate Customer Control Strategy: Self-Service Managing Information Support Systems to Enhance Customer Loyalty and Sales Providing Process Visibility Preventing Service Errors Developing and Managing Multisite Networks Network Characteristics Factors in Network Design Degree of Support for Operating Strategy Need for Interconnectedness Need for Standardization Latitude Allowed Site Managers: Preserving the Core Delivering Services Globally The Target Market and the Need for Customization Total Experience Services Culturally Sensitive Services Incorporating Franchising into the Strategy Employing Franchisees Enfranchising Employees Questions for Management 10. Attaining Customer Satisfaction: Doing Things Right the Second Time Doing It Right the First and Second Time Getting Customers to Complain: The British Airways The Problem Some Responses External and Internal Service Contracting Customer Service Contracting Internal Service Contracting Supplier Service Contracting Service Guarantees Questions in Guarantee Design What's the Primary Purpose? Internal Guarantees Impact on Suppliers The Economics of Service Guarantees Putting Guarantees in Context Service Recovery: A Case for Capability The Service Recovery Payoff Questions for Management 11. Measuring for Effective Management Estimating the Lifetime Value of a Customer Fitting Measurement to the Business Fitting Measurement to Purpose: Relevance The Xerox The AT&T Universal Card Taking Process into Account Determining the Form in Which Results Will Be Transmitted Other Criteria for Evaluating Measures and Methods Designing the Balanced Scorecard Questions for Management PART III: PUTTING IT ALL TOGETHER 12. Reengineering the Service Organization for Capability: Gains and Pains The Theory of Managing Change Organization Reengineering without a Crisis John Martin and Taco Bell Actions Gains Pains William Bratton and the NYPD Actions Gains Pains Arthur Martinez and Sears Actions Gains Pains Putting Organization Reengineering in Context Applying Cosmetics Picking Movers and Shakers Creating a Sense of Urgency Choosing the Theme and Vehicle Preparing People Getting the Facts Straight and Fast Restructuring the Organization Undertaking New Initiatives Widening the Competitive Gap: Sustaining Effort Observations Questions for Management 13. Leading and Living Service Profit Chain Management Service Profit Chain Leadership at Wal-Mart Service Profit Chain Leadership at Southwest Airlines Leading Service Profit Chain Management What Service Profit Chain Leaders Do: Supplying the Extras Believing in and Communicating the Basics Putting Employees First Investing in Customers Maintaining Measures and Rewards That Influence Behavior Communicating the Message Linking Organization Culture, Performance, and the Service Profit Chain Questions for Management 14. Auditing Service Profit Chain Management Success Leadership = Focus Strategic Service Vision = Positioning, Leverage, and Consistency Service Profit Chain = Value, Satisfaction, and Loyalty Profit Model = Value to Customers versus Costs to Providers Performing the Service Profit Chain Management Audit Identifying the Organizational Limit Assessing Importance Assessing Current Practice Measuring the Gaps Establishing Priorities and Taking Action A Final Word Notes Index About the Authors