The Service–Profit Chain: A Meta-Analytic Test of a Comprehensive Theoretical Framework

Jens Hogreve, Anja Iseke, Klaus Derfuss and Tönnjes Eller
Article Snapshot
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Service Profit Chain
Key Takeaways

What? The service–profit chain has become a prominent guidepost that many service firms, such as Google and IBM, adhere to.

So What? Some researchers call into question the theoretical rationale underlying the SPC and empirical evidence about the SPC remains fragmented and partly ambiguous.

Now What? Managers should implement internal service quality policies and practices that fit their specific service setting and balance employee satisfaction, operational excellence, and service orientation. With regard to external marketing, managers should pay attention to not only customer satisfaction with service outcomes but also the service encounter and customer relationship characteristics in their efforts to improve customer loyalty.

Full Article

​Article Snapshot: Executive Summaries from the Journal of Marketing

This meta-analysis tests the service–profit chain, identifies additional mechanisms that link internal service quality and firm performance, and challenges the implicit SPC rationale that firms should always maximize employee satisfaction and external service quality to optimize performance.


Meta-analytic structural equation models show that internal service quality translates into service performance through various mechanisms, beyond employee satisfaction, and highlight the importance of the service encounter and customer relationship characteristics for customer responses.

…our findings provide evidence that contradicts implicit SPC assumptions, in that they indicate employee satisfaction and external service quality have both positive and negative effects.


Research Question

The service–profit chain has become a prominent guidepost that many service firms, such as Google and IBM, adhere to. Yet some researchers call into question the theoretical rationale underlying the SPC and empirical evidence about the SPC remains fragmented and partly ambiguous. This study provides the first comprehensive empirical test of the SPC and explores whether additional mechanisms link internal service quality and external service quality with firm performance, beyond employee and customer satisfaction.

Methods

The authors reviewed the SPC and identified context factors as well as complementary mechanisms that link internal and external service quality with firm performance based on various streams of research. We aggregated 518 empirical studies that explicitly refer to the SPC or are service-specific and contain at least two different constructs of the SPC. Then we tested the SPC and our theoretical extensions based on meta-analytic structural equation models.

Findings

These new findings indicate that the SPC holds true but additional effects and the type of service and business need to be considered in order to better understand service firm performance. We find that internal service quality does not only affect service performance through employee satisfaction but may directly improve employee productivity, perceptions of external service quality, and firm profitability. Emotional contagion, customer-company identification, and positive customer relationships constitute additional levers for enhancing customer satisfaction and loyalty, beyond external service quality. In contrast to the SPC rationale, we find that employee satisfaction and external service quality have both positive and negative effects.

Implications

SPC constitutes an important guideline for service companies which needs some refinements. Managers should implement internal service quality policies and practices that fit their specific service setting and balance employee satisfaction, operational excellence, and service orientation. With regard to external marketing, managers should pay attention to not only customer satisfaction with service outcomes but also the service encounter and customer relationship characteristics in their efforts to improve customer loyalty. Rather than maximizing external service quality, managers should also consider the costs of implementing service quality and target different customer segments differently in order to improve firm profitability.

Questions for the Classroom

  • Do you think the service–profit chain adequately describes how firms can improve revenue and profitability?

  • Which key performance indicators should service companies adhere to? 

  • What may be the downsides of maximizing employee satisfaction and external service quality?


Article Citation: Jens Hogreve, Anja Iseke, Klaus Derfuss, and Tönnjes Eller (2017) The Service–Profit Chain: A Meta-Analytic Test of a Comprehensive Theoretical Framework. Journal of Marketing: May 2017, Vol. 81, No. 3, pp. 41-61.

doi: http://dx.doi.org/10.1509/jm.15.0395



Author Bio:

 
Jens Hogreve, Anja Iseke, Klaus Derfuss and Tönnjes Eller
Jens Hogreve is Professor and Chair of Service Management, Ingolstadt School of Management, Catholic University of Eichstaett-Ingolstadt (e-mail: jens.hogreve@ku.de). Anja Iseke is Professor of Human Resource Management, Hochschule Ostwestfalen-Lippe (e-mail: anja.iseke@hs-owl.de). Klaus Derfuss is Assistant Professor of Management Accounting, University of Hagen (e-mail: klaus.derfuss@fernuni-hagen.de). Tönnjes Eller is a former research associate at Ingolstadt School of Management, Catholic University of Eichstaett-Ingolstadt (e-mail: toennjes.eller@ku.de).
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