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Chapter from: "The Ultimate Question 2.0 (Revised and Expanded Edition): How Net Promoter Companies Thrive in a Customer-Driven World"
Published by: Harvard Business Publishing
Published in: 2011

Abstract

In today's Web-savvy world, where negative word of mouth is instantly broadcast over a global PA system, companies are trying to stay competitive by focusing more closely on their customers. They want to attract the most talented employees, too, so they know they need to be mission driven. But despite all the effort managers everywhere have put into these twin tasks - focusing on customers and inspiring employees - there hasn't been much progress. Why? Because most companies are ruled by financial and accounting metrics; at the end of the day, they yield to the gravitational pull of short-term gains. The result is what author and world-renowned expert on loyalty economics Fred Reichheld and his Bain colleague Rob Markey call ‘bad profits’ - profits earned at the expense of customer relationships. In this chapter, Reichheld and Markey use business stories pulled from the headlines - America Online, US Airways, Blockbuster - as classic examples of companies that relied on bad profits to spur growth, to disastrous effect. They contrast these ‘bad profit’ examples with the stories of Amazon, the Vanguard Group, Zappos, eBay, Southwest Airlines, and Costco, all of which handled customer relationships so deftly that their customers became ‘promoters’ instead of ‘detractors,’ generating good profits and sustainable growth. The chapter closes with an explanation of The Ultimate Question and a graphic that clearly shows who the industry leaders are when it comes to creating loyal customers. This chapter was originally published as Chapter 1 of ‘The Ultimate Question 2.0 (Revised and Expanded Edition): How Net Promoter Companies Thrive in a Customer-Driven World.’ This chapter is excerpted from ‘The Ultimate Question 2.0 (Revised and Expanded Edition): How Net Promoter Companies Thrive in a Customer-Driven World'.

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Abstract

In today's Web-savvy world, where negative word of mouth is instantly broadcast over a global PA system, companies are trying to stay competitive by focusing more closely on their customers. They want to attract the most talented employees, too, so they know they need to be mission driven. But despite all the effort managers everywhere have put into these twin tasks - focusing on customers and inspiring employees - there hasn't been much progress. Why? Because most companies are ruled by financial and accounting metrics; at the end of the day, they yield to the gravitational pull of short-term gains. The result is what author and world-renowned expert on loyalty economics Fred Reichheld and his Bain colleague Rob Markey call ‘bad profits’ - profits earned at the expense of customer relationships. In this chapter, Reichheld and Markey use business stories pulled from the headlines - America Online, US Airways, Blockbuster - as classic examples of companies that relied on bad profits to spur growth, to disastrous effect. They contrast these ‘bad profit’ examples with the stories of Amazon, the Vanguard Group, Zappos, eBay, Southwest Airlines, and Costco, all of which handled customer relationships so deftly that their customers became ‘promoters’ instead of ‘detractors,’ generating good profits and sustainable growth. The chapter closes with an explanation of The Ultimate Question and a graphic that clearly shows who the industry leaders are when it comes to creating loyal customers. This chapter was originally published as Chapter 1 of ‘The Ultimate Question 2.0 (Revised and Expanded Edition): How Net Promoter Companies Thrive in a Customer-Driven World.’ This chapter is excerpted from ‘The Ultimate Question 2.0 (Revised and Expanded Edition): How Net Promoter Companies Thrive in a Customer-Driven World'.

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