Books business strategy customer loyalty customer strategy service profit chain Strategy

Service Profit Chain, a great strategy tool

Service Profit Chain - ToolsHero
Service Profit Chain - ToolsHero

This text explains the idea of the Service Profit Chain in a sensible approach. After studying it, you perceive the core of this strategy principle.

What are the Service Profit Chain?

The American economists W. Earl Sasser Jr. and Leonard A. Schlesinger and American businessman James L. Heskett, revealed their ground-breaking guide “The Service Profit Chain – How leading companies link profit and growth to loyalty, satisfaction and value” in 1997, together with an evidence of the Service Profit Chain. The essential precept of the Service Profit Chain principle revolves round the truth that buyer satisfaction begins with good staffing and remedy of ones personal staff. Dedicated staff are sociable and convey this to the client.


Because it seems, profitable corporations stay on the prime as a result of they handle their Service Profit Chain properly. Apparently, there’s a hyperlink between service on the one hand and revenue on the opposite. This connection consists of hyperlinks; therefore the identify ‘chain’. Such corporations have a quantifiable set of relationships that instantly hyperlink revenue and progress to the various points of service. The Service Profit Chain includes buyer loyalty, buyer satisfaction, worker loyalty, worker satisfaction and productiveness. This manner, robust hyperlinks develop between:

  1. Profit – Buyer loyalty
  2. Worker loyalty – Buyer loyalty
  3. Worker satisfaction – Buyer satisfaction

Based mostly on the idea of the service-profit chain, a firm ought to set up a hyperlink between staff and buyer expertise on the one hand and create revenue and progress on the opposite. The totally different relationships reinforce one another; glad clients contribute to worker satisfaction, loyal staff contribute to buyer loyalty, and this buyer loyalty will ultimately end in revenue.

Service Profit Chain Model - ToolsHero


The Service Profit Chain exhibits that a firm’s profitability and progress are a results of buyer and worker satisfaction. The mannequin consists of sequential hyperlinks that result in success. Every hyperlink consists of so-called KPIs; Key Efficiency Indicators. In different phrases, these are essential efficiency indicators; variables which might be used to analyse the efficiency of a firm, model or product. The success of an organisation is measured with KPIs. These hyperlinks might be in comparison with steps that must be taken. The aim of those steps is to make a firm profitable. Every step can, because it have been, be elevated or decreased. An accurate ‘volume setting’ will end in revenue and progress for a firm. It includes the next seven steps:

Step 1 – Inner: service high quality

The primary few steps of the Service Profit Chain contain staff. An organisation can solely achieve success if it invests in its personal staff. Because of this a protected work surroundings must be created, staff must be concerned within the choice making course of and will work collectively in a nice environment. An organization can obtain this by investing of their staff, to help, practice and spend money on the event of its staff. All to an extent that hiring, remuneration and improvement coverage are essential elements of this primary step. New staff with the fitting angle, can contribute to the interior service high quality. By rewarding staff, they’re motivated to be actively engaged within the organisation. With coaching, schooling and course choices, staff are in a higher place to be absolutely dedicated to a firm. The interior service high quality will subsequently result in worker satisfaction.

Step 2 – Worker satisfaction

One step can’t be achieved with out the opposite. To fulfill staff and maintain them glad, the identical quantity of consideration have to be dedicated to them as is dedicated to clients. Engaged staff are extra productive, enabling them to offer a higher service. They cross on their enthusiasm, resulting in a constructive picture. Their job satisfaction has a constructive impact on attracting and retaining clients. This so-called buyer worth can solely be generated by glad staff. This leads to loyal and productive staff.

Step three – Loyal and productive staff

Dedicated staff are loyal to their firm, division and colleagues. They really feel intently concerned within the organisation and its joint aim. Subsequently, they’re extra productive and really feel very chargeable for any finish outcome. On this context, each worker is an envoy of the organisation and passes this view on to the purchasers. The deeper want of every particular person worker is essential as a way to make them much more loyal and productive, to allow them to carry out their job with pleasure.

Step four – Worth proposition for the client

The exterior worth proposition for the client can also be known as the client worth. Why does a buyer select a particular product or model or to solely do enterprise with a firm the client is already conversant in? In fact, the services or products itself is necessary, nevertheless the client worth is especially created by the workers of the corporate in query. They guarantee a buyer values the best way he/she is assisted and addressed. Glad staff really care concerning the firm and are capable of convey this to their clients in a good and trustworthy method. As a outcome, the service they supply will improve and their consideration will probably be honest. Clients respect this.

Step 5 – Buyer satisfaction

Step 5 and 6 are associated and are immediately linked. Buyer loyalty is a results of buyer satisfaction; a dissatisfied shopper won’t be loyal and won’t place a new order. The extra glad a buyer, the larger the prospect that the client will return for repeat enterprise or place bigger orders. Glad clients are seen as free publicity; they’re ambassadors of the corporate and may advocate merchandise and/or service of their setting with full enthusiasm.

Step 6 – Buyer loyalty

A buyer is loyal if he/she goes to the identical firm for a subsequent buy, regardless of whether or not or not the services or products is offered cheaper by a competitor. The client intentionally chooses to take action and needs to be helped by the corporate he/ she is already conversant in and has had constructive experiences with. This buyer loyalty will subsequently end in extra progress and a larger revenue for the corporate. If all clients are assisted properly and are supplied with the suitable service, this is able to be a superb funding for the longer term. Clients will proceed to return by their very own accord.

Step 7 – Profit and progress

Profit within the Service Profit Chain shouldn’t be the objective, it’s the outcome. As you’ll be able to conclude from the earlier steps, all further purchases will be sure that the corporate will make a revenue and develop. Glad clients have the power of phrase of mouth promoting; they contribute to the constructive picture of the corporate.


Every step within the Service Profit Chain is a situation that results in revenue. Your personal staff are key to buyer satisfaction and loyalty. With out step one, there isn’t a second step and with out the second step there isn’t a third step and so forth. Management performs a vital position on this chain. It’s the supervisor’s process to create a tradition during which worker’s are optimally facilitated and may flourish. However, managers are anticipated to give attention to customer support and repair provision. Each supervisor is answerable for being the hyperlink between staff and clients and to comply with and monitor the complete course of. Subsequently, managers make investments a lot of time in hiring the fitting staff and can do something to incorporate them within the choice making course of and assist them enhance. As a way to get dedicated staff, managers should take a look at everybody’s particular person position and encourage and help them on this respect. This manner, the service-profit chain may have the potential to succeed.

Now it’s your flip

Might you employ this principle to profit your corporation? Do you acknowledge the sensible rationalization or do your have any additions? Do you’ve got any ideas or tips that you simply need to share about service strategy and execution?

Share your expertise and information within the feedback field under.

For those who appreciated this text, then please subscribe to our Free Publication for the newest posts on Administration fashions and strategies. You can too discover us on Fb, LinkedIn and Google+.

Extra info

  1. Kamakura, W. A., Mittal, V., De Rosa, F., & Mazzon, J. A. (2002). Assessing the service-profit chain. Advertising science, 21(three), 294-317.
  2. Sasser, W. E., Schlesinger, L. A., & Heskett, J. L. (1997). Service revenue chain. Simon and Schuster.
  3. Silvestro, R., & Cross, S. (2000). Making use of the service revenue chain in a retail surroundings: Difficult the “satisfaction mirror. Worldwide Journal of Service Business Administration, 11(three), 244-268.

Learn how to cite this text:
Mulder, P. (2018). Service Profit Chain. Retrieved [insert date] from ToolsHero:

Add a hyperlink to this web page in your web site:
<a href=””>ToolsHero: Service Profit Chain</a>

Did you discover this text fascinating?
Your score is greater than welcome or share this text by way of Social media!

You could allow JavaScript to vote

(perform(d, s, id)
var js, fjs=d.getElementsByTagName(s)[0];
if(d.getElementById(id)) return;
fjs.parentNode.insertBefore(js, fjs);
(doc, ‘script’, ‘facebook-jssdk’));