Applying the service profit chain to analyse retail performance - The case of the managerial strait-jacket?

Purpose - The purpose of this paper is to apply Heskett, Sasser and Schlesinger's service profit chain to a single retail service with a view to developing a better understanding of the performance linkages between employee perceptions and performance, customer perceptions and behaviour, and financial performance. Design/methodology/approach - The research was based on the case study of a UK home improvement store chain. Measures of each of the variables in the service profit chain were analysed using Pearson's correlation coefficient, with a dataset based on 75 stores. Findings - Although analysis of the performance relationships revealed many interesting correlations, the data lent little support for some of the expected linkages; in particular, the "satisfaction mirror" effect between employee and customer satisfaction and loyalty, and the link between customer loyalty and financial performance. The possible asymmetries and non-linearity of certain performance relationships may also have added to the difficulty in applying the model to this organisation. Furthermore, the study revealed many performance linkages between variables which are not aligned in the service profit chain model. Originality/value - The value of the paper lies in the conclusions directed at both practising managers and academics. It is contended that the service profit chain model cannot be applied generically to services but that managers should undertake the development of context-specific models of their organisations. Unquestioning acceptance of Heskett et al.'s configuration of the service profit chain may indeed constrain managerial understanding of the complexities of business performance; whilst there is also a danger of applying a strait-jacket to academic thinking on performance relationships and performance improvement.