Assessing the service-profit chain: An empirical study in a Chinese securities firm

The Chinese financial service organizations are facing an increasing competition and changing environment in a global context after China's accession to the World Trade Organization. In order to seek new ways of adding value to their service, the Chinese financial service organizations need to switch from transaction-based marketing strategies to relationship marketing strategies by establishing a valid measurement system to define and track the results from management behavior through employee attitudes to customer satisfaction and financial performance.; The service-profit model (Heskett et al., 1994) is a well-known model that recognized the importance of understanding the relationship between customer, employee and organizational performance. This study modified the service-profit chain framework and applied it to China through an empirical study in a Chinese leading securities firm to assess the causal linkages in the service-profit chain model. This quantitatively driven empirical study is aimed at examining the nature of each link in the service-profit chain, illustrated by a comprehensive modeling approach. The study tries to draw practical recommendations for the managers, so as to maximize long-term profitability and achieve a lasting competitive advantage for the organization.; In this study, the service-profit chain model has been broken down into a customer-profit model, an employee-profit model and an employee-customer satisfaction connection model. The findings of the study support positive linkages between employee factor, customer factor and profitability. The study suggests that good service quality and strong customer relationship lead to high level of customer satisfaction, high customer satisfaction can result in positive word-of-mouth and favorable intended behavior, and profitability is positively influenced by customer loyalty. It also suggests employee satisfaction can be predicted by internal service quality perceived by employees, high employee satisfaction can result in lower intentional turnover and profitability is strongly influenced by employee tenure. In particular, employee service attitude is a more important factor for influencing customer perception of service quality, and trust has shown to play a key role in forming customer perception of relationship value. The study supports the proposition that customer satisfaction is positively correlated with employee satisfaction. These findings suggest both external and internal marketing helps achieving substantial profitability. The findings of the study have implications for Chinese financial service organizations to integrate employee measures, customer measures and profitability into the financial service context. And it has addressed the concern that the managers should pay more attention to improve the quality of work life, and focus on understanding what customers really need and creating the value to them. The study also has contributed to the knowledge building process by testing service-profit chain within a different culture.