New Zealand
United States
New Zealand
United States

The Service Profit Chain

Blog | October 19, 2020
Adam Hooley

When defining success in your business, you may be pondering many considerations. Is success retaining good team members? Without good team members, how will you look after your customers? Is it retaining the right customers? Without the customer, how will you make money? Is success being a profitable business? Without money, how can you afford to run your business?

Business owners are often perplexed by this decision and find themselves having many sleepless nights matching the pros and cons of each strategy in a journey to decide which one is most important. If they focus on their team, they may need to sacrifice customer satisfaction. If they focus on the customer, will this cause a reduction in efficiency and have a less profitable business? It may surprise you to know that when executed in the right order, these strategies will leverage each other to drive long term, sustainable, performance across the whole business. This sustainable performance is called the Service Profit Chain.

Service Profit Chain


Supported team > Productivity > Satisfaction > Loyalty

The first step in the service profit chain is to support your team. While the above may appear complex at first glance, there is some simplicity to it. Once you train and support your team, the satisfaction, loyalty and productivity will fall out on their own. You need to support your team by providing three core items. A position description, describing their integral role, policy and procedure guide explaining how to do the things required of them, and key performance indicators (KPI) to keep them accountable to these. When you give your team the tools to be accountable for their role, they will flourish. Once they start to succeed, they will enjoy their position much more, creating satisfaction, loyalty and increased productivity.


Quality > Value > Satisfaction > Loyalty

The second step in the service profit chain is to ensure your customer sees the value in your product. The good news here is that ‘value’ is a bi-product of team support. Once you start supporting your team and increasing productivity, you will begin to show value to your customer. It is crucial that you have some way of measuring value to your customer and don’t just assume you are delivering on it. Customer satisfaction rankings will determine how you tweak your team to deliver this value.


Satisfaction > Loyalty > Profitability

The third component of the service profit chain is improving your profitability. Again, there is not much to do here. Once you create satisfied team members and satisfied customers, your profit will increase. How, do you say? It is in my experience that happy and loyal team members are far more productive, as endorsed by the service profit chain. An increase in productivity means that they can manage more properties, therefore, generating more revenue per head. I have seen team members increase productivity by over 25% once they feel satisfied in their role. Once your customers are satisfied, they will show loyalty by staying longer, which will reduce churn. However, most importantly, satisfied customers are also promotors of your business and become a rich source of referrals.

What appeared to be a relatively complex decision at the start, turned out to be relatively easy. There are three individual components in the service profit chain with nine moving parts. To improve the performance of your team, show customer value and become more profitable, you only need to work on two of them. Support your team in their role and measure the satisfaction of your customers

Explore leading information and evolve your business