Linking organizational service orientation to retailer profitability: Insights from the service-profit chain

Abstract

This study examines how service orientation influences profitability in retail trade contexts. The authors develop a conceptual model based on the service-profit chain (SPC) framework suggesting that employee satisfaction and customer relationship performance (i.e., customer satisfaction, customer loyalty, and store image building) function as intermediate steps linking service orientation to retailer profitability. The model is tested with a matched sample of retail managers and employees from Brazil. Results demonstrate that service orientation directly influences employee satisfaction and customer relationship performance. Consistent with the traditional SPC framework, the analyses did not support a direct relationship between employee satisfaction and customer relationship performance when controlling for the effects of service orientation. Finally, customer relationship performance fully mediated the influence of service orientation on retailer profitability. Collectively, study findings support the notion that service orientation is reflective of both internal and external service quality. Managerial recommendations for implementing a service orientation are provided.