A Q&A With Fred Reichheld

Customer-Loyalty Guru on the Golden Rule of Driving Growth

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"Would you recommend us to a friend?" That simple question is what customer-loyalty guru Fred Reichheld, a fellow at Bain & Co., says is the key to identifying company promoters and detractors and, ultimately, a Net Promoter Score-the measure of an organization's customer-relationship savvy. The NPS is a true driver of profitability, Mr. Reichheld says. Of course, he says, it needs to be leveraged well-and CMOs have a responsibility to lead that charge.

Q. Anyone can have a Net Promoter Score-but how do you implement it within your organization and really make it work for you?

A. Operationally, you need to build a process for generating more promoters and fewer detractors. This requires two separate processes-one for resolving detractor problems, and another for delighting more promoters. These processes must be integrated into the normal business rhythms of management. They must be part of the weekly management meeting, the budgeting process [and] strategic plan so that they actually drive priorities and investments.

Q. To what extent must CMOs be involved in the process of obtaining and leveraging the NPS? What is their responsibility in such an initiative?

A. This is an enormous opportunity for CMOs to get marketing back on top of the CEO's agenda. But you can't go it alone. [CMOs] must get together with the other functions-financial, operations and, in some businesses, the Six Sigma team that is often part of the operations-to push this metric so that they get buy-in across the board. Then CMOs are ready to move because now they have a central metric that helps them make their case and set priorities in terms of what customers really care about.

Q. What specific efforts on the part of a company's marketing organization contribute to leveraging the NPS?

A. [Marketing executives] must develop a deep understanding of the concept across the management team-the CEO and his direct reports. They must understand that NPS is not just a metric and not just an interesting new research tool; it's a framework for setting strategic objectives and priorities to ensure organic growth. NPS can be the integrative solution that gets an organization focused back on getting more promoters and fewer detractors, because that's what drives growth and makes the investors happy.

Q. How does the loyalty of employees affect the loyalty of customers, and, ultimately, profits?

A. I have yet to find a company that has earned high levels of customer loyalty without first earning high levels of employee loyalty. You can spot a loyal employee because he is taking responsibility for building good relationships with customers. You can take average talent and turn it into far more than average teams when those teams are committed to "Golden Rule" behavior and delivering outstanding service for customers. Companies have hurt the potential loyalty of employees because they are addicted to the drug of relying on bad profits, doing things to customers that are embarrassing. Marketing departments should be worried about making sure that the vast majority of customers are being treated right. And yet too many marketers are busy trying to figure out a marketing scheme or coming up with a complicated plan that dupes customers into buying more than they need ... focusing their innovation on milking bad relationships instead of taking care of good ones.

Q. Do you think marketers are placing too much emphasis on cultivating promoters-and neglecting the task of minimizing detractors?

A. Most organizations have already begun to improve their results by focusing on detractors. However, what helps you grow your business is by generating more promoters. That's where marketing can make a big contribution. You create promoters by making sure the entire customer experience is outstanding. And most marketers don't have a tool yet that helps them to know whether they deliver [that]. That's where the NPS comes in. The average company's NPS is in the single digits: between 5% and 10%. This means that promoters barely outnumber detractors. Whom do you blame? Everyone-and therefore, no one is accountable. The CMO is in the position to clarify this problem and get everyone working in the direction so that they can generate profitable growth.

Q. If the ultimate question-and the key metric for measuring customer loyalty-is "Would you recommend this to a friend?" what would be the next most important question to ask of a target market?

A. When you know whether someone is a promoter or detractor, [ask], "What's the most important thing we can do to earn a higher score from you?" But the diagnosis usually requires engaging in a dialogue with specific customers. Surveys are quite limited in their ability to get to the underlying root cause-so get your front-line employees in dialogues with promoters and detractors. Then, they can learn to diagnose the reason for the score and take appropriate actions to improve the score.

Q. Many companies say and are convinced they're customer- centric-but very few are. Why does such a gap exist?

A. It's just because there's no credible, reliable metric. Without a grade, you create your own reality.
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