Gary Loveman, Earl Sasser and Leonard Schlesinger (1994)

Gary Loveman, Earl Sasser, and Leonard Schlesinger are renowned management scholars known for their groundbreaking research in the field of service management and customer loyalty. In their 1994 Harvard Business Review article titled “Putting the Service-Profit Chain to Work,” they introduced the concept of the service-profit chain, a powerful framework that links employee satisfaction, customer loyalty, and financial performance. This article has had a profound impact on how businesses approach service excellence and customer relationship management.

Gary Loveman earned his Ph.D. in Economics from the Massachusetts Institute of Technology (MIT) and later served as an Associate Professor at Harvard Business School. He went on to become the Chief Executive Officer and Chairman of Caesars Entertainment Corporation, where he applied the principles of the service-profit chain to transform the company’s operations and achieve remarkable success.

Earl Sasser is a Baker Foundation Professor Emeritus at Harvard Business School. He has made significant contributions to the study of service management, customer satisfaction, and service quality. Sasser’s research focuses on understanding customer needs and expectations and how organizations can meet and exceed those expectations to drive customer loyalty.

Leonard Schlesinger is also a Baker Foundation Professor Emeritus at Harvard Business School. He is an expert in the areas of organizational behavior, customer service, and service management. Schlesinger’s research has provided valuable insights into how organizations can create a customer-centric culture to drive sustainable business growth.

In their seminal 1994 article, Loveman, Sasser, and Schlesinger proposed the service-profit chain as a model to explain the interconnections between employee satisfaction, customer loyalty, and financial performance. The underlying premise of the service-profit chain is that highly engaged and satisfied employees lead to satisfied and loyal customers, resulting in increased revenue and profitability for the organization.

The service-profit chain consists of five interconnected links, each representing a critical element in the chain:

  • Internal Service Quality: The first link in the chain emphasizes the importance of providing high-quality service to employees within the organization. When employees are satisfied with their work environment, training, and support, they are more likely to deliver exceptional service to customers.
  • Employee Satisfaction: Satisfied employees are more motivated, committed, and productive. They are inclined to go above and beyond to meet customer needs, leading to improved customer experiences.
  • Customer Satisfaction: Satisfied customers are more likely to become loyal patrons, making repeat purchases and recommending the company to others. They also tend to have higher levels of trust in the organization.
  • Customer Loyalty: Loyal customers are the lifeblood of a successful business. They have a higher customer lifetime value, meaning they generate more revenue over time, compared to one-time or infrequent customers.
  • Financial Performance: The ultimate outcome of the service-profit chain is improved financial performance. Companies that excel in delivering superior service and building customer loyalty typically experience higher profitability and sustainable growth.

The authors provide empirical evidence and case studies to support their service-profit chain model. They draw examples from a wide range of industries, including hospitality, retail, and professional services, to demonstrate how the principles of the chain can be applied to various business settings.

One of the most notable case studies in the article is the transformation of Caesars Entertainment Corporation under Gary Loveman’s leadership. By focusing on employee engagement, customer satisfaction, and loyalty programs, Loveman turned the struggling casino company into a highly profitable and customer-centric enterprise.

The service-profit chain’s significance lies in its ability to emphasize the crucial role of employees in delivering exceptional service and driving business success. It highlights that satisfied and motivated employees are more likely to deliver exceptional experiences to customers, resulting in increased customer loyalty and financial gains for the organization.

Moreover, the service-profit chain has broader implications beyond the business-to-consumer (B2C) sector. It is also applicable in the business-to-business (B2B) context, as strong relationships with key clients and partners are built on the same principles of employee satisfaction and customer loyalty.

Since its publication, the service-profit chain has become a cornerstone concept in service management and customer experience strategies. Organizations worldwide have adopted this model to guide their efforts in improving employee satisfaction, customer loyalty, and financial performance.

In conclusion, the 1994 article “Putting the Service-Profit Chain to Work” by Gary Loveman, Earl Sasser, and Leonard Schlesinger revolutionized the understanding of service management and customer loyalty. The service-profit chain provides a compelling framework for businesses to create a customer-centric culture, emphasizing the critical role of satisfied and engaged employees in delivering exceptional service and driving long-term financial success. This influential article has left a lasting impact on how organizations approach service excellence and customer relationship management, and its principles continue to shape business strategies and practices to this day.