THE PROFIT CHAIN

The Profit Chain Attaining Total Customer Satisfaction: Doing Things Right the Second Time

Student: Vincent W. Wedelich

Professor: Phaedon P. Papadopoulos, Ph. D.

Overview

Doing It Right the First and Second Time Getting Customers to Complain External and Internal Service Contracting Service Guarantees Service Recovery Questions for Management

End with Questions??

Doing It Right the First and Second Time “do it right the first time.” Motorola

Six sigma; zero defects.

Doing it right the second time may actually produce higher levels of satisfaction than doing it right the first time.

Must exceed the customers expectations the second time.

Doing It Right the First and Second Time UPS is an example of doing it right the first

time.

But if they did not do it right; and had to try and figure out what happened; they did not have the ability to resolve where the package was.

FEDEX had this ability to track packages.

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Getting Customers to Complain

The British Airways Experience

The Problem

Some Responses

The “Complaint Iceberg” at British Airways.

8%

23%

69%

Don’t talk to Anyone

Talk to nearest BA Employee

Talk to Customer Relations Rep

THE KNOWN WATERLINE

To put this into perspective:

An opportunity occurs somewhere on the network every 15 seconds.

Potential Revenue Lost (Millions)

£ 47

£ 141

£ 423

The Complaint Escalation Pyramid

The pyramid described in numbers

The Complaint Process Stated in Percentages

Vice President

Middle Management

Frontline Service

Providers

1 Complaint =

2 Customers dissatisfied at middle management level =

10 who complain to middle management =

50 Customers who remain dissatisfied after frontline effort =

200 who complain to front line =

500 who are dissatisfied =

One in two of these still dissatisfied complain

25% of complainants still dissatisfied

One in five complain

25% of these customers still dissatisfied =

40% Complain =

100% of dissatisfied customers =

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External and Internal Service Contracting Customer Service Contracting

Internal Service Contracting

Supplier Service Contracting

External and Internal Service Contracting Customer Service Contracting

Serve as a device for: Improving customer satisfaction Internal operations Supplier performance

External and Internal Service Contracting Internal Service Contracting

Serve as a device for internal departments:1) Which other departments in the organization

are our most important customer’s?2) What are their needs and our current

performance?3) What is the gap between their needs and our

current performance?4) What are the costs and payoffs of closing the

gap?

External and Internal Service Contracting Supplier Service Contracting

ISO 9000 is a quality program that suppliers are required to have in order to supply clients that have achieved this certificate of quality.

Has led to a demand for service guarantees.

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Service Guarantees

Questions in Guarantee Design

What’s the Primary Purpose

Internal Guarantees

Impact on Suppliers

The Economic of Service Guarantees

Putting Guarantees in Context

Putting Guarantees in ContextC

usto

mer

Sat

isfa

ctio

n S

urve

y R

atin

gs

Service Guarantees InvokedFew Many

Low

High

Celebrate Performance

Send help

Change Management

SCATTER DIAGRAM OF UNIT PERFORMANCE

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Service Recovery

A Case for Capability

The service recovery needs to take place at the frontline. Fast Customized Personalized

Service Recovery

The British Airway method

Convince all customer-contact personnel that customers were to be trusted and that the airlines wished to retain their business. Give the customer an Apology. To be asked what they wanted as a solution. A quick resolution of the complaint. Assurance that the problem was being fixed. Solutions by CareLine phone calls if possible.

The Service Recovery Payoff

Non complainants

Complaints Not Resolved

Complaints Resolved

Complaints Resolved Quickly

How many of your unhappy customers will buy from you again?

Minor Complaints ($1-5 losses)

Major Complaints (over $100 losses)

Percent of customers that will buy from you again.

9%37%

19%46%

54%70%

82%95%

Dissatisfied Customers’ Repurchase Intentions under Various Conditions

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Questions for Management

What is the rate at which dissatisfied customers complain about your products or services? How do you know?

How are complaints encouraged by your organization? What kind of incentives are provided to customers to complain?


Are a majority of customer complaints made to representatives of the organization who can do something about them? If not, what has to be done to insure that this is the case?

Are the reactions of dissatisfied customers assembled in one data base (a consolidated “listening post”) for management information, planning, and longer term action?


Based on information from dissatisfied customers, what is the potential for renegotiating agreements both across relevant departments of your organization and with “supply chain” partners?

What does fast, personalized, customized recovery mean in your business? What has to be done to achieve it in your organization?


To what extent has service contracting been employed within the organization and with other organizations in the supply chain?

How would a service guarantee help your organization elicit complaints, provide an incentive for effective service recovery, and service as a vehicle for improving service operations?

Questions??

References: James L. Heskett, W. Earl Sasser Jr, Leonard

A. Schlesinger, The Service Profit Chain, pp. 175 -197 (The Free Press) ,

Business

THE PROFIT CHAIN