From leadership to customer loyalty : reconceptualizing the service-profit-chain

Abstract

With consumers becoming progressively more sophisticated in their evaluations of their service consumption experiences companies are forced to focus greater attention on the nature and quality of the service provided to customers, making front-line employees of central importance for the customer experience in the service industry. An employee’s attitude and actions during the service provision can leave an impression on the customer, contributing to their level of satisfaction, loyalty and, ultimately, financial performance for the firm. This paper examines a well-known framework, the service-profit-chain, which suggests that human resource practices have the ability to effectively impact employee attitudes and behaviors in ways that can improve both service quality for customers and overall performance for the firm. However, this research contributes to the literature by proposing an expanded version of the framework, adding new predictors of customer outcomes through leadership behaviors and employee engagement. The results from two field studies suggest a number of key findings. First, the relationship between employee attitudes and performance may have been underestimated in the past due to the way the relationship has been studied. The inclusion of additional predictors better defines this relationship and equips organizations with a clearer picture in delivering high quality service, and ultimately giving firms a better chance of achieving beneficial customer outcomes. In addition, the use of a daily diary study suggests that in certain service contexts, it may be much more advantageous to study the theorized relationship in its transient form (i.e., daily, weekly, etc.) versus as stable and enduring attitudes. This research indicates that front-line service employees’ level of engagement will change from day to day, suggesting to managers that leadership behaviors must be exhibited regularly (i.e., daily) in order to ensure high level customer service is given. Implications for research and practitioners are discussed.