PEOPLE, SERVICE, SUCCESS

1. Notes to accompany our viewing of these Harvard video tapes Authors: James Heskett, Earl Sasser & Leonard Schlesinger PEOPLE, SERVICE, SUCCESS

2. THE SERVICE PROFIT CHAIN EMPLOYEE SATISFACTION & LOYALTY CUSTOMER SATISFACTION & LOYALTY SERVICE VALUE PROFIT & GROWTH

3. THE SERVICE PROFIT CHAIN STARTS WITH PROFITS AND GROWTH

4. SOME KEY THOUGHTS Treat problems like opportunities to build customer relationships. The value in many traditional manufacturing firms today comes from a combination of product and service. How to get your front line workers to understand their impact on the business? Xerox found that a very satisfied customer is 6x more willing to buy from you again vs. A satisfied customer. If front line employees can’t manage themselves, there is no way you can have very satisfied customers.

5. BENEFITS OF QUALITY SERVICE Companies that provide high quality service have higher sales growth and higher profitability.

6. BENEFITS OF QUALITY SERVICE - 2 % LOW + 6 % HIGH Growth in market share is significantly impacted by service quality

7. QUALITY SERVICE PREVENTS CUSTOMER TURNOVER SATISFIED CUSTOMERS 5 % DISSATISFIED CUSTOMERS 40% Dissatisfied customers turnover eight times more than satisfied customers

8. REDUCING CUSTOMER DEFECTIONS 85% 75% 50% 35% BRANCH DEPOSITS INSURANCE BROKERAGE CREDIT CARDS SOFTWARE • Reducing customer defection boosts profits 25% to 85% - based on average customer life • Source: Bain Consulting

9. All these examples started by identifying customer needs and then changing to meet customer needs! • What are the key lessons from Taco Bell? • What are the key lessons from Citibank? • What are the key lessons from Xerox?

10. APPLICATION AT MOBIL How is Mobil applying these concepts in the retail business? What are we trying to do to use these concepts in the service component of the refining business? What can you do to apply these concepts to your change project or your work unit?

11. APPLICATION AT TCB What are the key points of understanding we should take from this for TCB? What word would you substitute for profits in this video, so it would better fit us? Why? To get to the a very high level of sustainable quality, to provide outstanding service that is a competitive advantage, where are there the greatest tensions in TCB?

12. MOBILIZING PEOPLE FOR BREAKTHROUGH SERVICE • HIRING - Southwest Airlines • Find the right people, with the right attitude • Hire for things that can not be taught • Be very selective, choose people based on what makes your most successful people successful • Truly use the first year as a probation period • TOOLS & TRAINING - Service Master • Tailor unique tools to help people on your jobs • Make sure people know the why of their work, how they impact others. • Treat people with dignity, help them learn and grow

13. MOBILIZING PEOPLE FOR BREAKTHROUGH SERVICE • Management support • Stay in touch with the front line, service master requires execs to do front line jobs one day a year. • A leader should have servants heart • Not let perks of office impact effectiveness • Not afraid to take a back seat for recognition • Willing to do menial task to confirm the importance of the mundane

14. KEY THOUGHTS A key to employee satisfaction is their ability to deliver results to customers People want to be able to help their customers The single biggest factor impacting job satisfaction is the ability to meet customer needs, 75% of those who felt they were able to meet customer needs reported job satisfaction. Only 35% of those that did not feel they could meet customer needs were satisfied

15. KEY THOUGHTS Those not satisfied with their job are three times as likely to turnover as those that are satisfied Turnover negatively impacts customer satisfaction Customers buy more from long term employees The secret to a good service business is skilled employees that care

16. APPLICATION AT MOBIL What can we learn from Southwest and Service Master? How is Mobil applying these concepts in the retail business? What are we trying to do to use these concepts in the service component of the refining business? What can you do to apply these concepts to your change project or your work unit?

17. LISTENING TO YOUR CUSTOMERS • Make listening to the customer a key • Keep the end user in the feedback loop • Establish listening posts at all customer interfaces • Train your people to be effective at interacting with the customers, have them gain customer information at all points of contact • Observe end users using the products or services

18. LISTENING TO YOUR CUSTOMERS • Create systems, access to information • Turn what you learn from customers into systems, so you can better meet customer needs in the future • Use this knowledge to create competitive advantage, e.g. Ritz-Carlton customer data • Keep listening to your customers because they change, and so do their needs

19. KEY THOUGHTS Listening provides the stimulus for change Listening is the nutrition for your company You can’t be customer focused if you don’t listen Listening to your customers creates loyalty and increased word of mouth advertising “Moments of truth” between employees and customer are your quality of service Management has to listen to its employees, if it wants to reap the benefit of their listening

20. APPLICATION AT MOBIL What can we learn from the Ritz-Carlton, Intuit, and MacIsaac? How is Mobil applying these concepts in the retail business? What are we trying to do to use these concepts in the service component of the refining business? What can you do to apply these concepts to your change project or your work unit?

21. THE LIFETIME VALUE OF CUSTOMERS • Zero defections – MBNA America discovered that customers did not begin to become profitable until they were customers for 5 years • Increased their customer retention rate from the low 80’s to the high 90’s over 8 years & increased profitability 16 times • Needed to increase customer service dramatically to retain customers - measured 16 aspects of customer service • Get the right customers and keep them - their philosophy • Research - shows a strong relationship between customer retention and profitability for 5 companies in the credit business & no relationship between portfolio size and profitability

22. THE LIFETIME VALUE OF CUSTOMERS Sewell calculated that people will buy 15-20 cars in their lifetime - they make sure their people know that At Sewell service people build the bonds with customers, they are the ones that see the customer repeatedly People satisfied with service will spread positive word of mouth and buy from you again Operating costs are driven down by less need for advertising and the ability to succeed with a smaller sales force In a tough economy in Dallas Sewell was able to triple in size

24. KEY THOUGHTS Customer loyalty is about the economics of turning transactions into relationships Train people to think of themselves as a customer Measure customer satisfaction and tie it to bonus systems Its systems, not just smiles - you have to be able to deliver if you want to retain customers

25. APPLICATION AT MOBIL What can we learn from the MBNA America and Sewell Motor Company? How is Mobil applying these concepts in the retail business? What are we trying to do to use these concepts in the service component of the refining business? What can you do to apply these concepts to your change project or your work unit?

26. SERVICE RECOVERY • To use service recovery effectively you must: • Encourage, empower and train first line employees • Design speedy service recovery systems • Learn from mistakes and improve basic services • The employee is the person on the spot when a customer has a problem, they must be empowered to fix the problem • Surveys by intuit after problem with quick books showed their customers felt better about them because of how they handled the large problem • British airways put in systems that allows it to respond to customer complaints rapidly

27. SERVICE RECOVERY Its important to improve how easy it is to communicate with the company BA found that unhappy customers tell 10 others about their experience Happy customers will tell 9 others BA found that only 8% of customers with a problem actually complain, 23% get problem resolved some other way and 69% get no satisfaction BA calculated that a 1% increase in their knowledge of customer problems would result in 200,000 - 400,000 pounds of increased revenue a year

28. KEY THOUGHTS Recovery is how companies plan for the inevitable mistakes that they will make If you learn from a mistake its an opportunity to improve If you respond well to a problem, its a way to wow the customer and increase customer retention and satisfaction levels The first step in service recovery is saying I’m sorry Employees must know how to handle difficult interactions with upset customers - training key Do right by the customer - motto of intuit

29. APPLICATION AT MOBIL What can we learn from the Sewell Motor Company, Intuit, MacIsaac, the Ritz Carlton and British Airways about service recovery? How is Mobil applying these concepts in the retail business? What are we trying to do to use these concepts in the service component of the refining business? What can you do to apply these concepts to your change project or your work unit?