Service to profit: It all starts with happy staff

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By: Wise Marketer Staff |

Posted on June 15, 2002

Service to profit: It all starts with happy staff

Leading companies can stay on top by managing the 'service/profit chain' - a set of relationships shown by Harvard Business School researchers to link customer satisfaction to profit. And employee satisfaction plays a major role in the chain.

The idea of the chain is both basic and familiar: happy employees make for happy customers who are loyal, and a loyal customer is far more profitable than a new one who has no relationship. But take away any of the links in the chain and everything falls apart.

The first link Good managers recognise that satisfied employees are at the beginning of the service/profit chain. According to Maria Bavender of Hallmark's Gift Certificate Center, employee recognition is key to keeping satisfied staff. Bavendar explained, "A small investment in an appropriate employee incentive program can lead to great dividends for any company."

Official recognition leads to employee loyalty and, consequently, increased productivity. This in turn creates value and results in greater customer satisfaction and, of course, customer loyalty. According to Frederick Reichheld's book, The Loyalty Effect, a 5% increase in customer loyalty can boost profits by anything from 25% to as much as 85%.

The weak link A chain really is only as good as its weakest link, and the first link in the service/profit chain is often overlooked in favour of the second. A well planned incentive programme is certainly a good way to motivate employees - strengthening the first link. Over the past ten years, Gift Certificate Center has seen companies improving staff loyalty, customer loyalty and bottom-line profits by implementing employee incentive schemes like its Premiere Choice Award programme. Companies can order personalized awards online and have them despatched the same day. The employees can redeem awards at more than 400 national and regional retailers, restaurants, travel and entertainment providers in the US.

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