Is there one question you can ask that is most likely to help you calculate and monetize customer loyalty? Try this:
“How likely are you to recommend us to a friend?”
That’s the key message from Boston-based loyalty guru Fred Reichheld, one of my favourite management pundits. He believes customer loyalty – based on instituting meticulous customer feedback systems – is the key to “good profits” (i.e., long-term) and sustained growth. You can find more about this in his recent book – short and easy to understand – The Ultimate Question: Driving Good Profits and True Growth.
The latest issue of Rotman Magazine from the U of T Business School offers an interview with Reichheld that provides a great primer to his work – and how you can put his theories into practice at your business.
Reading the article on-screen is just a little complicated. You have to download the whole issue (a big file), so it could take some time. Click here and look for the Fall 2006 issue with Nelson Mandela on the cover. (The Reichheld story is on page 8 of the magazine, or on page 10 as counted by Adobe Reader.)
My favourite part:
Rotman: It’s been said that half of the frontline employees working today are actually undermining customer loyalty; what can be done about this?
Reichheld: This is a huge problem. Some of the loyalty leaders I study say that the first thing to do is focus on your own employees, and I think in many cases that’s right. Until you have frontline employees who are promoters, who are enthusiastic advocates for your product or service, there’s no way you’re going to turn customers into promoters.
And as we’ve seen in our research, there are more detractors amongst front-line employees than there are promoters. It seems obvious, but companies often ignore this, and they go on thinking, ‘we need to be more customer-focused in order to grow, so we’re going to send out a million surveys.’
That’s the wrong thing to do: the first thing to do is talk to your own employees, and figure out what it is that they aren’t happy about, and get their input to fix it.