Greater the Promoters, Greater the Growth

This past week I read a very interesting Harvard Business Review article, "The One Number You Need to Grow," penned by Frederick Reichheld. I encourage you to get a copy of the article ... it is a worthy read.

Reichheld’s research indicates that there is a strong correlation between a company’s growth rate and the percentage of it’s customers who are willing to recommend the company to a friend. His working assumption is that evangelical customer loyalty is one of the most important drivers of growth as Reichheld contends, “the ultimate act of loyalty is a recommendation to a friend.”

His article focuses on how companies have gone astray in trying to measure “loyalty” through complicated customer satisfaction surveys. Instead, he contends, “you don’t need expensive surveys and complex statistical models. You only have to ask your customers one question: How likely is it that you would recommend [company x] to a friend or a colleague."

In his case studies, Reichheld used a ten-point scale to measure the likelihood of a customer recommendation where 10 means “extremely likely” to recommend, 5 means “neutral,” and 0 means “not at all likely” to recommend.

Customers that answered with a 9 or a 10 were classified as “Promoters.” Those that answered with a 7 or 8 were classified as “Passively Satisfied” and those that gave ratings from 0 to 6 were classified as “Detractors.”

This leads to Reichheld’s simplistic premise -- “The path to sustainable, profitable growth begins with creating more promoters and fewer detractors.”

I may have overly simplified his HBR report but the critical nugget of knowledge for marketers is that Reichheld, a long-time believer that customer loyalty is the harbinger for whether or not a company can activate and sustain profitability, is now singing the praises of getting evangelical loyal customers to become, in essence, the marketing department.

Sound familiar? It should.

In Creating Customer Evangelists, Ben McConnell and Jackie Huba expertly wrote about not only the importance of getting current customers to become, in essence, a volunteer sales force but they also gave tactical advice on how businesses can engage their loyal customers to become evangelical “promoters.”

While I have your attention, I gotta close with a plug. On March 16th, Ben and Jackie will drop by the Brand Autopsy coroner offices for the second leg of their Business Blog Book Tour.

Comments

[hugh macleod]

Well, Bill Bernbach's favorite quip "The best advertising is word-of-mouth" is as true today as it's ever been.

Funny, if memory serves me correctly, both of you guys have a background with Starbucks, and one of you has experience with Wholefoods. Both companies were pioneers in taking the "our stores are museums, our products are the souveneirs" idea to the world of perishable goods.

Nice one! ;-)

[johnmoore (unitedstates)]

Hugh, thanks for your comments. I like that line -- "our stores are museums, our products are the souvenirs.” Where’d you get it from?

Both Starbucks and Whole Foods Market have managed to be remarkable in rather unremarkable areas (coffee and grocery) by not only focusing on the "experience" but also by being mission-bound.

I’ve always viewed the experiential part of our business as treating people as being curious and discerning. Too many brands want to hand-hold (i.e. manipulate) their customers because they treat people as being boring and indifferent.

Being mission-bound is all about promoting the category (high-quality coffee and natural/organic foods) and not the brand. The mission comes first and the strong brand is simply a by-product of being focused on the mission. Both Starbucks and Whole Foods Market are on a mission to get people to enjoy better tasting, higher quality coffee and food so that consumers can live a more rewarding life.

My time at Starbucks and Whole Foods Market has so shaped my marketing mind that I doubt I could ever work at a staid company who doesn’t strive to be remarkable and isn’t mission-bound.

[John Moore (UK)]

I love this Reicheld wisdom, and I especially welcome his advocacy of a simple notion over a lot of complicated metrics. I think this kind of simplicity is essential to managing complexity.

I also really appreciated your comments about being mission based and treating customers as discerning, instead of spoon-feeding based on a low-common-denominator view of the human spirit!

[hugh macleod]

To the best of my knowledge, "our stores are museums, the products are the souvenirs" comes from the Joe Boxer clothing company.

[Tim Whelan]

What a refreshing position. As a customer experience advocator I deal with a lot of Brand and marketing professionals. Hmmm, Actually they are not so professional most of the time, but re- users of tired phylosophies. I hear 1000s of reditions of methodolologies that take businesses down the raod of mediocrity instead of great success. I truly beleve that the customer is and always will be the key to driving competion and the success key of any business. I think that Reichfield and others before him who have proffered methodolologies centered on the customer as a focus piece in business and not an item number are going in the right direction.

The big problem is that management has also bought into this hype of mediocrity and manipulation. They have removed themselves from the interactive insight of direct customer interaaction. Thanks for the article.