Fred Reichheld Gets It—Do You?

Right before the holiday season began, I read a great book: The Ultimate Question: Driving Good Profits and True Growth by Fred Reichheld. I was so taken by the simplicity—but sheer genius-- of the author’s concept that I bought it for Optimal’s client service executives. If you haven’t read it, the book revolves around the concept of customer satisfaction as one of the single most important requirements for business growth. And, as a man obsessed with service who has read a fair bit on the subject, I have always agreed with this thesis.

In a nutshell, Reichheld says that companies have good and bad profits. Bad profits are about extracting value from customers. Good profits are about creating value. Unfair or misleading pricing, or saving money by delivering a poor customer experience are examples of bad profits—profits earned at the expense of the client. Good profits result from willing customers—customers who are so excited to do business with the company that they would never be wooed by a competitor; in fact, they act as referral sources for the company.

So the ultimate question becomes: “How likely is it that you would recommend this company to a friend or colleague?”

Depending on their responses, your clients will fall into one of three categories:

Promoters—those from whom you are earning good profits—are loyal, keep coming back, and urge their contacts to do the same. They will always recommend your company.

Passives –kind of in the middle. They are satisfied, but not loyal. They might or might not recommend your company

Detractors—unhappy customers who will talk about their bad experiences with your company.

Reichheld asserts that you can take the percentage of your customers who are promoters (P) and subtract the percentage who are detractors (D) to derive the Net Promoter Score (NPS) for a company (P-D=NPS).

The metric is simple; the concept is revolutionary. Finally, a measurement that directly links quality of service and relationships with growth prospects. And I’m not the only one who thinks so. Amazon, Costco and Harley-Davidson are just a few of the companies that boast a high NPS score. How would your organization fare?

I want to hear from you! Respond to one, all, or none of the questions below. I just want to hear your thoughts! And, if you post a response, be sure to check back for a reply!

  • Does your organization survive on bad profits or thrive on good profits?
  • As a consumer, would you be classified as a promoter, passive, or detractor? Are you trapped in bad service relationships?
  • Have you read the book? If so, how have you translated the equation into action items to improve a service experience?

Post your response!