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The Ultimate Question: Driving Good Profits and True Growth Hardcover – 31 Mar 2006

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Product details

  • Hardcover: 224 pages
  • Publisher: Harvard Business School Press (1 Feb. 2006)
  • Language: English
  • ISBN-10: 1591397839
  • ISBN-13: 978-1591397830
  • Product Dimensions: 23.4 x 16.3 x 2.5 cm
  • Average Customer Review: 4.4 out of 5 stars  See all reviews (5 customer reviews)
  • Amazon Bestsellers Rank: 221,861 in Books (See Top 100 in Books)

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Product Description

From the Author

What is NPS?

NPS stands for Net Promoter Score. Just as net worth represents the difference between financial assets and liabilities, Net Promoter quantifies the difference between customer assets and liabilities. With one question, we can sort customers into three categories: Promoters who are loyal and enthusiastic; Passives who are satisfied but unenthusiastic; and Detractors who are unhappy but trapped in a bad relationship. Quite simply, you calculate the NPS score by applying the formula P - D = NPS, where P and D are the percentage of promoters and detractors.

Is there a correlation between NPS and growth in a company?

Yes! In a 2003 study based on more than 150,000 customers, we found a very strong correlation between net promoter scores and a company's growth relative to its competitors. From the airline industry, to retail banks, to delivery services, to personal computers, firms with the best NPS demonstrated superior growth. Companies that have achieved sustainable growth over a ten year period have double the NPS of others.

What companies are already utilizing NPS?

NPS has begun to spread like wildfire. Jeff Immelt, CEO of General Electric, has announced that NPS will be deployed across all 500+ GE business lines--and will drive executive bonuses. Other firms who have adopted NPS include Intuit, American Express, MSN, Schwab, Thermo-Electron, and many others spanning both the consumer and business-to-business sectors.

Can high NPS scores translate to greater economic success? What are some examples?

While NPS scores in and of themselves do not guarantee profitable growth, high scores are a strong predictor of economic success. HomeBanc, a mortgage company in Atlanta, has a whopping NPS score of 84 percent. As might be expected from this score, HomeBanc's productivity levels average 60 percent higher than industry standards. The firm's growth exceeded 25% each year for the past decade - more than doubling the industry rate.

Why does NPS work?

Promoters and detractors behave differently and generate fundamentally different economic consequences for the firm. While today's accounting systems camouflage this fact, the best way to profitably grow is to get more promoters and fewer detractors. The benefits of promoters include higher retention rates, higher cross-sell rates, constructive feedback, cost efficiencies, and most important of all, they are the source of highly crucial word-of-mouth that drives corporate reputations and customer referrals.

You talk about good and bad profits. How can any profit be considered bad?

Consider those resentful overage and usage fees from your cell phone supplier, or those plans that manipulate you into buying more minutes than you need. These practices generate bad profits. Whenever a customer feels deceived, coerced, or disrespected, then earnings from that customer are bad--they come at the customer's expense. Bad profits convert customers into detractors who blacken a firm's reputation and choke off a company's best opportunity for true growth, the kind of growth that is both profitable and sustainable. The pursuit of bad profits alienates customers and demoralizes employees. Good profits come from satisfied customers who not only provide repeat business but bring new customers to the company.

What is probably the most crucial factor in a company's economic success? Why?

Word-of-mouth has much more power in today's economy than one might think. Word-of-mouth works both ways: detractors spread negative word-of-mouth and cause people to turn away, while conversely, promoters spread positive word-of-mouth and bring new people in the door. Promoters account for more than 80% of positive referrals--and only promoters can build great brands and corporate reputations.

What are some of the ways bad profits undermine growth?

Bad profits create customers who feel disgruntled by their experience with a company. Often, these customers find ways to get even in ways that hurt a company's growth. For instance, detractors drive up service costs by reporting numerous problems, demoralize employees with complaints and demands, and gripe to friends, acquaintances, colleagues and relatives. All of these will have a negative effect on a company's economic success, illustrating why bad profits are so destructive. The average firm today has turned 33% of its customers into detractors--some firms exceed 50% detractors! The average NPS is less than 10%. The quest for profitable growth becomes a near-hopeless struggle when firms have almost as many detractors as promoters.

About the Author

Fred Reichheld is a Director Emeritus of Bain and Company and a Bain Fellow. He is the Author of The Loyalty Effect as well as of influential articles in Harvard Business Review and the Wall Street Journal. His Work has been featured in leading publications including the New York Times, Business Week, the Financial Times, and The Economist

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34 of 39 people found the following review helpful By Reader from Oxford on 6 Jun. 2006
Format: Hardcover
Reichheld proposes you just need to ask one question in order to drive business success. This is "How likely is it that you would recommend this company to a friend or colleague". This is commendably simple and the resulting `promoters minus detractors' used to derive the Net Promoter Score (NPS) gives an easy to understand measure of how well your business is doing.

However, this approach has not gone down well with his peers. He bravely acknowledges the storm of criticism (p183), but then does not address the fundamental flaws they raise, arguing merely that people are against it because they can't believe something so simple can be effective.

Two fundamental flaws which he doesn't deal with are:
* A simple measure like NPS doesn't tell you what needs fixing. A measure which tells you you're not doing very well, but which doesn't guide you towards the priorities for improvement is frustratingly useless.
* While simplicity is a good thing to have, the NPS can be a danger to your company profits. You can't buy customer satisfaction, but you can buy loyalty by cutting prices. Improving an NPS score can lead to `buying loyalty' behaviour, and damage shareholder value.

He argues that the Net Promoter Score is a better approach than measuring customer satisfaction, and takes the whole of chapter 5 to make this point. However, he just uses the weaknesses of poor quality customer satisfaction programmes to highlight the advantages of the NPS. Most would agree there are many companies wasting small fortunes on inadequate customer satisfaction programmes, and these would be better spending less money on a Net Promoter Score approach, but this doesn't mean the NPS is better than a properly run customer satisfaction programme, i.e.
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Format: Hardcover
I have been reading The Ultimate Question during my holidays.

I must say I have learnt and enjoyed at the same time. I think Fred offers a very well documented, well structured and interesting vision on how to really focus businesses to customers. He has made me reflect quite a lot on how I am doing in this area.

I definitely recomend this book (Fred, add 1 to your promoters list :-)

I am looking forward to reading more from Fred on this subject.
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4 of 6 people found the following review helpful By John G on 19 Sept. 2006
Format: Hardcover Verified Purchase
This book is essential reading, well written, engaging and rips through the over complicated world of customer surveys. The proof Fred Reichheld offers about the link between client satisfaction and growth is attractive and powerful. I will be implementing many of the ideas immediately in my business and believe that many organisations will be forced to look again at their approch to customer surveys. There will be a lot of overpriced marketing survey companies quaking in their boots when this information reaches a wider audience. I suggest you and they read it now.
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9 of 15 people found the following review helpful By Robert Morris TOP 100 REVIEWER on 14 Feb. 2006
Format: Hardcover
Those who have already read Reichheld’s two previous books, The Loyalty Effect and Loyalty Rules!, are already well-aware of his exceptional reasoning and writing skills. Throughout most of his career, he has demonstrated those skills when rigorously examining one of the most important and yet least understood business subjects: loyalty. Now more than ever before, the success or failure of individual careers and even entire organizations has depended on the presence or absence of loyalty in one form or another. Obviously, loyalty depends upon trust which must be earned over time but quickly lost, sometimes permanently.
In this volume, The Ultimate Question, Reichheld again examines various dimensions of loyalty while extending his attention beyond it to what I consider to be an even more important issue: knowing what is most important to customers by accurately measuring the nature and extent of customers’ satisfaction. As Reichheld explains,“What this book a wholly new kind of measurement, a measurement that can focus an entire organization on improving every customer’s experience day in and day out. The process is both simple and radical. Companies need to ask just one question -- the Ultimate Question -- in a regular, systematic, and timely fashion.”
After struggling with one issue, I have decided not to reveal the question itself but can assert that it is the one question which must be asked because the responses to it are needed to guide and inform efforts to achieve “good profits and true growth.” Unlike bad profits which are earned at the expense of customer relationships, good profits are earned with customers’ enthusiastic cooperation.
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1 of 3 people found the following review helpful By Rolf Dobelli TOP 1000 REVIEWER on 20 Feb. 2007
Format: Hardcover
This surprising book offers a powerful message based on common sense: Companies that treat their customers ethically and honestly will build a dedicated client base, and thus grow steadily and earn "good profits." The opposite lesson is that companies that take advantage of their customers through predatory pricing or shoddy products earn "bad profits" while building an army of disenchanted buyers who tell their friends to stay away. Fred Reichheld makes his point in black and white: Rip off your customers at your peril. He amply illustrates his message with powerful case studies, and includes details about using the "ultimate" question - "How likely is it that you would recommend this business to a friend or colleague?" - and the resulting "Net Promotor Score" to identify your best customers. We commend this book to service or product providers who want to achieve solid growth by nurturing their core consumers.
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