Business Builder
The Service Profit Chain: How to Turn Your Customers into Company Advocates
Many of our new customers are companies who are struggling to compete with “big box stores” or “Internet wholesalers” selling A/V goods at much lower prices. As the A/V industry continues to mature, it becomes more essential that we focus on the service we offer rather than the products themselves. Measuring the quality of service can be an obtuse concept unless you have a little direction from the experts. The Service Profit Chain is a concept developed by authors at the Harvard Business Review which directly addresses the relationship of customer loyalty and profitability. The concept requires a paradigm shift from the traditional focus of quantity of market share, instead focusing on the quality of market share.
Based on the Service Profit Chain model, profitability and growth are determined primarily by maximizing the lifetime value of your customers, and that value is fully realized only when you earn the customer's loyalty. In one study, a 5% increase in customer loyalty produced profit increases from 25% to 85%. A loyal customer is one who obeys the three R’s: Retention, Repeat Sales, and Referrals. Major corporations (many of which are household names) subscribe to the Service Profit Chain model and have achieved a level of success that is enviable.
Service that is good, but not exceptional, can be your worst enemy. The difference between “good” and “exceptional” is the difference between a customer who “might” buy from you again and one who will “definitely” buy from you again…and again. Xerox conducted a study which found that a “highly satisfied” customer is six times more likely to buy again as one who is simply “satisfied”.
The basic premise of these findings is that customers who say they are “satisfied” or “don’t complain” will not necessarily come back to you when they upgrade their equipment or want to install a new distributed audio system. They are easily swayed by your competition or by “great deals” on the Internet. “Satisfied” is simply no longer acceptable.
Building loyalty means resolving to deliver superior quality and service at every customer touch point. That passion must extend from the highest levels of management to the front lines of your sales staff and installers. If you're serious about gaining loyal customers, you need to gain customer feedback and document your results. More importantly, you must respond to that feedback quickly with service improvements.
So where does it all start? The diagram below outlines the links in the Service-Profit Chain. You will notice that one of the most important links in this chain is the interface between the external service value and customer satisfaction. The external service value represents the service concept:  the results for the customers. This is the interface of your installers, sales reps and managers, and your client.
As evidenced by the diagram, customer loyalty is driven by customer satisfaction, customer satisfaction is driven by value, value is driven by employee productivity, and so on. You might have already noticed the beginning of the chain – Internal Service Quality. It becomes clear that employee satisfaction and loyalty are directly proportional to the service they provide to your customers. Your business success depends on how you cultivate your employees into a productive, passionate, quality-oriented team.
How this relates to your A/V Business Training is an integral part of your custom A/V business. Build a culture of education and invest in your select employees to ensure that they have the skills to do the job correctly. Investing in your employees through ISF/HAA/RTI certification or the Sencore Academy will result in more efficient, productive installations.
A skillfully executed installation increases the value of your services and your company in your customer’s eyes. Utilizing installation tools such as sound analyzers and video generators increase installation accuracy and provide a level of professionalism and credibility that also adds additional value. This “value” is what drives customer satisfaction, loyalty and ultimately your profitability in the long run.
A full version of “Putting the Service-Profit Chain to Work” can be ordered online through the Harvard Business Review Website at: http://harvardbusinessonline.hbsp.harvard.edu