Applying the service profit chain in a retail environment

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Abstract
This paper reports the result of an exploratory study of the application of Heskett, Sasser and Schlesinger’s service profit chain to a single organisation, one of the UKs leading grocery retailers. The results showed correlations between profit, customer loyalty, customer satisfaction, service value, internal service quality, output quality and productivity; however there was no support for the claim that these are driven by employee satisfaction and loyalty. In fact, to the contrary, there was a strong correlation between employee dissatisfaction and store profitability. This research raises questions about the robustness of a central premise of the service profit chain, which is that strong business performance is the result of a mirror-effect between employee and customer satisfaction. The paper considers the implications for management and calls for the development of a contingency based understanding of the drivers of business success.