The Ultimate Question: Driving Good Profits and True Growth
by Fred Reichheld (Book and CD)
A Book Review by Ed Ruggero
A storm knocked down the line providing phone, cable and internet service to my home. Although there was no interruption in service, the line itself lay across the yard and was a hazard. I spent a half hour trying to report the problem by phone, but the voice prompts kept taking me to dead ends. I went to the company’s website, described my problem in a comments box, and sat back to wait for the repair crew. Hours later I received an email telling me that an automated line-test—probably generated by my logging on—had determined that my service was working fine (which I knew) and that the company valued my business.
Forty-eight hours after the line went down, I finally got a human on the phone, and a repairman arrived a few hours later. He was a cheerful fellow, and in the spirit of being a good employee, asked me how I enjoyed his company’s highly touted fiber-optic service. I told him that if I had a viable option, I’d drop them in a minute. I’ve told this story several times to neighbors and will probably keep on telling it, not because I’m a curmudgeon, but because I feel that the cable company deliberately provides poor service (saving money on real customer service operators, for instance), overcharges me, and isn’t the least bit concerned about me as a customer.
This is the kind of dysfunctional customer relationship Fred Reichheld writes about in his book The Ultimate Question. Customers like me, who never fail to disparage this company, show up in the right place on a balance sheet but do not contribute to growth. In fact, a company with enough detractors inhibits its own growth.
Reichheld, a Director Emeritus at Bain & Company, says that companies can adopt a simple metric, called the Net Promoter Score, that will allow them to better understand their customers and enable growth.
The Ultimate Question a firm should ask a customer is, “On a scale of zero to ten, how likely are you to recommend us to a friend or family member?” The nines and tens are promoters—loyal customers who spend more and return more often. The sevens and eights are passiveᾹthey could take you or leave you. The zero to six crowd are your detractors, the people who will leave as soon as possible and will tell everyone they know about your terrible service or product. The percentage of promoters minus the percentage of detractors gives the Net Promoter Score, or NPS.
Reichheld’s detractors say that the concept is statistically unsound, but it’s hard to argue with the common sense behind the idea and the case studies, and hard to argue with success. Companies with a high NPS do well; companies with a poor NPS do poorly.
Reichheld cites research showing that even those customers who rate themselves “Completely satisfied” on conventional customer surveys do not act accordingly. They are not loyal and will often migrate to other companies with very little cause. But a customer who says she is ‘highly likely” to recommend your company in a trusted relationship—to a friend or family member is a customer who will return, who will spend more per transaction, and who will spread good news about your company.
Detractors have lots of information that can help companies improve their product or service (and ultimately their NPS). One wireless provider was making big bucks from people paying high premiums to drop the service contract—clearly not a formula for long term success. When they asked the detractors why they were leaving (this follow-up is critical, of course) they learned that the sales team was selling the most expensive products, regardless of customer need. The company helped their existing customers negotiate a better deal for products that fit. It also restructured sales team compensation to incent behaviors that would benefit the customer and the company.
Reichheld spends a lot of time criticizing conventional customer satisfaction surveys, and he makes a very good case. For large companies with a sophisticated understanding of their customer base, his book offers quite sophisticated ways to employ the NPS concept. But even small operations can use the tool. I am helping institute it at my local SPCA, for instance.
Too often a consultant will write a book promising insight into a proprietary tool, but the book turns out to be a book-length ad for an expensive service (Human Sigma: Managing the Exmployee-Customer Encounter, by John H. Fleming and Jim Asplund is an egregious example). Reichheld actually delivers information that can be used right away. His presentation was lucid and concise, the case studies well-chosen and his argument, at the last, convincing. The NPS can be a powerful tool in the hands of inspired leaders.
