What is the relationship between the gaps Model of service quality and the service-profit chain

What is a Service-Profit Chain?

The service profit chain is a representation of the internal service quality in a firm and how it links with other internal service elements to affect revenue growth and profitability. 

The service profit chain helps managers identify the factors important to improve the profitability as well as the revenue growth.

What are the Elements of the Service-Profit Chain? 

Internal Service Quality - The first link is the internal service quality which includes the internal factors of an organization such as the workplace, employee selection, various tools used for serving customers, and the various employee development programs. 

Employee Satisfaction - The service quality factors lead to greater employee satisfaction. 

Employee Productivity - If employees are satisfied in your organization, it leads to increased employee productivity and thus they will be able to provide much better service to the customers. 

Employee Retention - A satisfied employee is an asset to a company and this satisfaction also prevents the employee from defecting i.e. leads to employee retention.

External Service Value - If the above links are nurtured well, they enhance the external service value provided to the customer but if the previous links are not nurtured well it may even weaken the next link. External service value is what a customer feels he is getting for what he is paying, if the gap between customer's expectations and the company's offerings is minimum then the customers feel that they are getting a high service value. 

Customer Satisfaction - Greater service value leads to greater customer satisfaction. Customer satisfaction is increased by the frequency of good service and also it has to be maintained in order to keep the customers happy and thus the internal employees play a big role in increasing customer satisfaction.

Customer Loyalty - If a customer is satisfied with the service provided, it means that if given a chance he will choose the same service again the next time. Customer Loyalty depends on customer satisfaction, research has shown that people who were satisfied and very satisfied showed a significant difference in customer loyalty. The results showed that a very satisfied customer can be as 6 times as loyal as a satisfied customer. 

Revenue Growth and Increased Profitability - More loyal customers directly lead to faster revenue growth and increased profitability. Good quality of sales leads to more profitability than a high number of low-quality sales.

The service-profit chain model tries to link all the components required to make an organization successful. According to this model, a company that performs well in one aspect and poorly in another will eventually develop problems that affect the entire organization. This working model highlights the importance of the links between quality management, a good work force and exceptional service to the customer.

What is Service-Profit Chain?

1. According to the service-profit chain model, a connection exists between high profits, customer loyalty and satisfaction and employee productivity and satisfaction. The application of this model first considers profits generated by the loyalty of a customer. Under this model, the customer's satisfaction directly impacts the customer's loyalty. This satisfaction results from the value the customer receives from the company's satisfied and productive employees. Employee satisfaction results from the support of upper management that understands the needs of both the employees and the customers.

Customer Satisfaction Drives Customer Loyalty

1. Customer satisfaction does not equal customer loyalty. In order to gain customer loyalty, the customer has to perceive value for money spent. The service-profit chain model recognizes that a customer becomes loyal through this perceived value. Since customer expectations constantly change, the organization must recognize and support these changes.

Value

1. Value means different things to different people. Many individuals associate value with an emotional aspect of the purchase based on experiences. For example, a company can create a well-priced product that has exceptional guarantees. However, a customer might not consider this product valuable enough to become a loyal customer. This is on of the reasons why advertisers use different campaigns for the same product. People respond to stimuli differently based on emotions and experiences.

Employee Productivity Drives Value

1. The workforce of a company can help to drive the company's profits. When an organization has engaged, productive and highly satisfied employees, the organization will have a higher chance of succeeding. Many types of businesses from service businesses to manufacturing businesses sell products to customers. If the business's employees have a good working knowledge of the product, the employees have a better ability to service and satisfy customers. Product knowledge comes from both experience and longevity with a company. New employees typically cannot relate to customers as effectively as employees with years of experience working for the company. The service-profit chain model recognizes that employee retention directly impacts customer satisfaction.

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