Colonial Savings Bank - Service Profit Chain - Example

BLUEPRINTING THE SERVICE PROFIT CHAIN Introduction The idea behind services blueprinting is fairly simple: Companies put themselves in their customers' shoes to find out what's working, what's not, and what needs to be changed. But its simplicity may belie its effectiveness. In fact blueprinting may well be the best method for measuring services success, and may also hold the key to future services innovation. This paper looks at a case study of the case of the Colonial Savings Bank and redesigns the process of loan application, approval and refinancing. This was one of the areas where the bank was doing well but this has since changed. The paper seeks to redesign the process so that it is more customer-friendly, effective and protective of Bank assets. The paper first analyses the current refinancing process explaining why the bank might have originally designed it that way. It then looks at the problems that arise as a result of the current process. Finally the paper proposes a new service blueprint. CURRENT REFINANCING PROCESS AND JUSTIFICATION Under the current process there are five distinct stages involved in the loans approval process. Firstly there is the loans application process. Here the customer completes the loan application form for the loan agent who informs him of the refinancing options. The customer also signs papers to allow a credit check then awaits approval. The second stage is that of loan processing. The loan processor requests a credit check, verification of loans or mortgages from other financial institutions, an appraisal of property and employment verification. The justification of this is that the bank has to ensure that the customer who gets the loan can pay. It also helps in ensuring that the customer has not hidden some important information from the bank. At this stage if there are any discrepancies the customer is expected to explain the same in writing. If the explanation is acceptable the letter is placed in the customers file and sent to the loan agent for approval. The justification for the requirement that it should be in writing is that the bank needs written proof that is kept for future reference. Upon approval a letter is sent to the customer requiring him to call the closing agent a schedule a closing date. It is at this stage that the closing agent requests the customer’s lawyer’s name. The lawyer is responsible for arranging a termite inspection, a title search, and insurance as well as preparing the closing papers. The importance of this stage is to ensure that the property actually belongs to the customer. The searches reveal the ownership as well as any encumbrances on the property. PROBLEMS WITH THE PROCESS Organizations that are most successful in providing new services keep their service development processes from being ad hoc.1 In short, they prepare and move systematically through a set of planned stages from the establishment of clear objectives, to idea generation, to concept development, service design, prototyping, service launch , and customer feedback. Service design requires an understanding of the customer outcome and customer process, the way the customer experience unfolds over time through interactions at many different touch points. A well designed service that is pleasing to experience can provide the firm with a key point of differentiation from competitors. In this case the customers raised several issues regarding the process. One of the customers raised the issue of every correspondence being in writing. The customer felt that instead of writing to the customers they should be called to make the process short. However the bank needs a record of all the correspondence between the customer and itself. Telephone conversations are not easy to record and therefore the bank. Another customer complained that it took two months to refinance his loan. He further complained that the money he had saved on closing costs was eaten up by the extra month’s higher mortgage payments. This is one major problem with the current system. When refinancing the loan, the bank already has the details of the customer and so it should be easier to refinance the loan since the customer is still using the same security. Another issue raised by the customers was that an appraisal was done on their property again yet they had not added any additions to the property. The bank must have done the appraisal again to know if there have been any additions or subtractions to the property. This is important for the bank to protect its assets. The system also had a problem of too many people handling the file and so the customer did not know who to call. The bank must have divided the work for efficiency. Maintaining a good contact with the customer is a very essential element in the service profit chain. Customer satisfaction brings about satisfaction and in the end customer loyalty and increased profit margins. There are two things about loyalty which are important to notice. A satisfied customer is not automatically a loyal customer. It’s only the super satisfied customers who become loyal. That is why ‘satisfied’ is not enough in a world of abundance which is the situation for many companies today. The expectations of the customer change all the time. If a company wants to maintain the loyalty it has to get better and better. Another customer complained that it took so long for his loan to be approved that the appraisal report and termite inspection report expired. This meant the customer had to get another report at an extra expense. Inasmuch as the bank needs to scrutinize the application and all the requisite documentation, the process should not take so long to occasion an expiration of the appraisal and termite inspection report. In addition to delay in processing the loan, another issue raised was that of a customer who drove to the bank deliver the lawyers papers but the customers file could not be found until the next day. This raises a lot of questions about the system of filing used by the bank. The filing system should be one that enables the bank to serve the customer using the shortest time possible. The customer further complained that the closing agent told him that if she hit a snag closing could be postponed. This clearly shows that the customer is left in uncertainty. This particular customer had in fact taken an off day from work to attend the closing. This is a problem that the bank could have been avoided by the bank by preparing everything prior to the day of closing. There was also an issue raised by a customer was that he received documents from the loan repayment specialist requiring him to specify how he wanted to repay his mortgage. The customer had already filled out all this details at closing and felt this as a bother. This shows that there is no proper co-ordination among the bank’s departments. Another customer complained that he was called by the bank to be informed that his mortgage repayment was overdue yet the same should have been withdrawn automatically from his cheque account. Upon closing the bank should set up an automatic withdrawal of mortgage fees to avoid such situations. THE SERVICE BLUE PRINTING CONCEPT The service blueprinting concept was originally conceived over twenty years ago by a bank executive, Lynn Shostack, who published a paper on the rudiments of the approach in the Harvard Business Review. In the intervening years the technique has evolved significantly. Service blueprints could be described as service roadmaps -- tangible, visual documents that lay out where and how customers and companies interact. More specifically, blueprints are information-laden documents made up of five components that, when drawn up together, can help make customer-company relationship and the customer experience crystal clear. Customer actions include "all of the steps that customers take as part of the service delivery process." Onstage/visible contact employee actions are the actions of frontline contact employees that occur as part of a face-to-face encounter with customers. Backstage/visible contact employee actions are non-visible interactions with customers, such as telephone calls, as well as other activities employees undertake in order to prepare to serve customers or that are part of their role responsibilities. Support processes are all activities carried out by individuals in a company who are not contact employees, but whose functions are crucial to the carrying out of services processes. Physical evidence represents all of the tangibles that customers are exposed or collect to during their contact with a company. In designing the blueprints we have to begin with the customers’ actions since that is the foundation of all other elements. The basis of the design is the complaints from the customers which have already been analyzed above. One of the most distinctive characteristics of services is their process nature.2 Unlike physical goods, services are dynamic, unfolding over a period of time through a sequence or constellation of events and steps. The service process can be viewed as a chain or constellation of activities that allow the service to function effectively.3 In this case for instance the service is represented by events occurring between the banks employees and the customers. To function effectively for the client, the entire sequence of loan application should be coordinated and managed as a whole, over time, with emphasis on including the resources and steps that produce value for the customer. An analysis of the client’s interactions with the bank, and the underlying support systems is essential to managing this chain of service activities. In this case study on of the major problems is the time for the processing of the loan. Of the many complaints raised by the customers many pointed out that it took too long to process their loans or refinance them. One customer even pointed out that his refinancing took longer than it would have taken in another bank. This is a serious concern that should be addressed in the new design of the loan process. Another concern that needs to be addressed is the maintaining of good contact with the client. The customers did not get good customer care from the banks agents. THE SERVICE PROFIT CHAIN The service-profit chain is a framework for linking service operations, employee assessments, and customer assessments to a firm's profitability. The Service Profit Chain provides an integrative framework for understanding how a firm's operational investments into service operations are related to customer perceptions and behaviors, and how these translate into profits. For a firm, it provides much needed guidance about the complex interrelationships among operational investments, customer perceptions, and the bottom line. The service-profit chain establishes relationships between profitability, customer loyalty, and employee satisfaction, loyalty, and productivity. The links in the chain which should be regarded as propositions are as follows: Profit and growth are stimulated primarily by customer loyalty. Loyalty is a direct result of customer satisfaction. Satisfaction is largely influenced by the value of services provided to customers. Value is created by satisfied, loyal, and productive employees. Employee satisfaction, in turn, results primarily from high-quality support services and policies that enable employees to deliver results to customers. The service-profit chain is also defined by a special kind of leadership. Managers of exemplary service companies emphasize the importance of each employee and customer. For these managers, the focus on customers and employees is no empty slogan tailored to an annual management meeting. In our case study from there is need to improve on the services in order to earn loyalty from the customers. THE NEW MODEL In designing a new model, emphasis is made on making the process more time saving. This will ensure that the appraisal reports and termite inspection report do not expire before the loan has been approved. The new model maintains the same stages albeit with improvements. Stage one:Loan Application The customer meets the agent and discusses with the loan agent about the kind of loan that he wants. The agent performs quick calculations according to the customers data to see if the customer qualifies. If the customer qualifies, the agent asks for the original documentation an certifies them to be true copies of the original. The customer then fills and signs an application form and goes home to wait for approval. Stage two: Loan Processing Here the documentation is verified by the loan processor. The loan processor verifies the loans or mortgages from other financial institution and the employment verification. In case of a problem the customer is required to explain in writing Stage three: Loan Closing Here if the loan is approved the customer is called to schedule a closing date. When the customer comes for closing the customer is given the loan approval letter. This will help to save the time of sending the letter to the customer and requiring the customer to call. The bank authorizes its lawyers to carry out the title search, a termite inspection, a survey and also to prepare the closing papers. This is a slightly different approach from the current one in that the bank does not use the customer’s lawyer but its own. The aim of this is to ensure that the customer’s lawyer does not collude with the client to give false or fraudulent documents. Stage four: New Account Establishment The loan servicing specialist makes sure that the previous loan is paid off and the new loan set up properly. Stage five: Loan Payment Setup The loan service specialist calculates the exact amount of payments and sets up automatic withdrawal of mortgage fees. This will avoid the situation where the customer is called to be informed that the mortgage is due. In addition to the above changes there should be established an office of in charge of all correspondence regarding the loans. This office should have all the records of the loans so that any customer with any query regarding a loan can call this office. This office should also be responsible for ensuring that everything is ready before the closing date. CONCLUSION By saving on time the service to the customers is enhanced .this was one of the major concerns of the customers. Efficiency with regard to scheduling of closing dates will also improve on the customer satisfaction. Improvement on the customer service will in turn increase the profit of the institution. REFERENCES A. Persson and L. Ryals, “Customer assets and customer equity: Management and measurement issues” Marketing Theory, December 1, 2010 C. Gronroos, Service Marketing and Management: A Customer Relationship Management Approach (Chichester, West Sussex, England: John Wiley & Sons, Ltd., 2000). H. Evanschitzky, C. 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Raab, “What Matters More?: Contrasting the Effects of Job Satisfaction and Service Climate on Hotel Food and Beverage” Managers' Job Performance Cornell Hospitality Quarterly, August 1, 2010 Read More