This minor project asks you to demonstrate your understanding of the service-pro

Question

This minor project asks you to demonstrate your understanding of the service-profit chain as applied to a specific company. Marshall introduces this in chapter 9 by claiming the New Dominant Logic in marketing implies a shift from physical goods to intangible services. This project asks you to write up a case study that documents how a company, in addition to its products, uses its services as a core offering.

BNSF Railway as the company, write up a generic marketing report that is 1,200 words or less and contains three sections:

Background: How has the growth of services as core offerings shifted over time in this company?

Value Chain: What is the value offering of this company, along with its continuum of product and service offerings?

Service Quality: How is the company’s Service-Profit Chain used to create customer satisfaction and loyalty?

Textbook is:

Marshall, G. W., & Johnston, M. W. (2015). Marketing Management: Chapter 9: Service as the Core Offering. New York, NY:

            McGraw-Hill Education

Explanation / Answer

Firstly, lets understand what exactly does 'Service Profit Chain' (SPC) means.

In simplest terms, SPC means translates good service or the outcome of good services into profitability. SPC is a theory, a business model, which establishes relationship between profitability, customer loyalty, employee satisfaction and productivity. If you see, growth and profitability are mainly stimulated by customer loyalty. Loyalty is a result of customer satisfaction. Customer satisfaction is largely influenced by the value of services provided to them. Value towards services of customers is created by loyal, satisfied and productive employees. Employee's satisfaction is an outcome of high-quality support system and policies which allows employees to deliver results to customers. This, in short, is how the link is made between Service and Profit, thus establishing the SPC itself.

Products are available in the market at a very competitive range. Great products are always available to customers. There is no shortage of good products in the market. For instance, if you want a good haircut, there will be 3 salons available to you in a line. If you need a great car, here are 5 great models of different companies at your doorstep. This list goes on. But out of the, all products might be good to you. But which one will you choose. All are of almost same price range and same features.

Here, service comes into picture. One salon will welcome you with greetings and if you are in line, will offer you water or a tea/coffee so that you wait and feel good about the waiting. The other salon might not acknowledge you, plus keep you waiting without asking or letting you know how much time it will take. Which salon would you choose? There’s the answer. A better service ends up with better profitability. Because of your good service, now no matter how many salons are there in your arena, he will come to you again and again.

Now let’s come to the BNSF company case.

Background:

BNSF was not an over-night success. It was a result of sheer hard work, patience, planning and execution and merger or acquisition of around 400 different railroad over the course of 160 years.

Now the main services which BNSF proudly provides is that of shipping of Agricultural products, consumer products, energy fuels like coal, crude, LPG, etc., industrial products and intermodal.

BNSF, obviously, didn’t start these services since inception. Over the years, it reached such superior milestones. Now, if you see, BNSF’s main competitor is Union Pacific Railroad (UPR). There are other small competitors too. But there is a reason why BNSF stands firmly at the 1st position in its space.

Products are the same. But what differs is the service. They have, over the time, created exposure to so many yards and facilities, which directly and indirectly helps them in so many ways. Plus, they have so many routes at their disposal. BNSF has effectively and efficiently divided its operating divisions in 13 categories of batches. Inclusive of all this, BNSF has passenger services providing facilities too. One of their prime concern is Safety. They have done numerous efforts to safely operate all their operations and safety is one of their prime service offering. If you notice the paint scheme of BNSF, it has excelled in that section too. They have the most colorful class 1 railroads in North America.

Now, except their main product of the freight services and passenger services, they have done so many efforts in other things too. This shows how much are they offering as ‘services’ along with their main product ranges. Terms like ‘safety’ and ‘colorful’ attracts customers. Thus, there are many such small things in the background which makes BNSF what it is today.

Value Chain:

Value chain, in short, means a process in which the company receives raw materials, adds value to those raw materials through various processes to create a finished product. It is also known as a set of activities by which a business adds value to a product or a chain of products, including its production, marketing, and after-sales service.

Considering BNSF, its main Value offering is the Safety, timely delivery and great service. These 3 are some of the prime values which BNSF offers. Its main value stands towards customer satisfaction. “No matter what you are shipping, BNSF has a service to meet your needs.” This statement is posted down on their website in the ‘Ship with BNSF’ section. This shows their value towards their customers.

Along with their great range of products and services, these are the types of services which BNSF thrives to offer their customers.

Service Quality:

Service quality is a concept where comparisons are made between perceived expectations of a service with perceived performance. It depicts that a firm with high service quality will meet and/or exceed customer’s expectations whilst remaining economically competitive.

SPC, as described earlier, shows a casual relationship between, starting with, service and ending with profitability. It unfolds eight major steps in the chain. I.e.:

In the case of BNSF, its main growth is because of the ‘People’. Here, People stands for both, Customers as well as Employees. Without getting effective loyalty from customers as well as employees, BNSF couldn’t grow into such a great venture. That’s because, if customers weren’t loyal, they would have switched to BNSF’s competitors, and if employees’ weren’t loyal, their work ethics and hard-work ratio would have drastically fallen down. Now, as I had mentioned earlier, the core product of BNSF, the freight, intermodal, passenger service, etc. are somewhat same as its competitors. But because of the value in its product and services, BNSF is standing where it stands today. Thus, Value input influences a lot. Next, employee’s productivity matters a lot too. If their productivity hampers, their work hampers. If their work hampers, the value of service provided to the customer hampers, and this hampers productivity. For their productivity not to get hampered, they need to be satisfied. If employees are not satisfied, how can they deliver effectively and efficiently. This all takes efforts and BNSF have taken those efforts in a great way. Thus, from the 1st stage to the last stage, internal quality is a mandate. If there is no quality inside, how can the quality be reflected outside. Thus, inside the organization, there should be a supreme quality in the work structure which will help in gaining eternal bliss and success.

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