Too many companies are addicted to bad profits—profits that come at customers' expense and drain the value out of customer relationships. Whenever a customer feels misled, mistreated, ignored, or coerced, then profits from that customer are bad. Bad profits come from unfair or misleading pricing. Bad profits arise when companies save money by delivering a lousy customer experience. Bad profits are about extracting value from customers, not creating value.
Bad profits often boost short-term earnings; in the long run, they burn out employees and alienate customers. They also undermine growth by creating legions of detractors—customers who sully the firm's reputation and switch to competitors at the earliest opportunity. Bad profits choke off a company's best opportunities for true growth, the kind of growth that is both profitable and sustainable.
But it doesn't have to be this way. Some companies grow because they have learned to tell the difference between bad profits and good profits—and to focus their efforts on the good kind.
If bad profits are earned at the expense of customers, good profits are earned with customers' enthusiastic cooperation. A company earns good profits when it so delights its customers that they willingly come back for more—and not only that, they tell their friends and colleagues to do business with the company. The right goal for a company that wants to break an addiction to bad profits is to build relationships of such high quality that those relationships create promoters, generate good profits, and fuel growth.
Just as detractors have a bullhorn for spreading their negative word-of-mouth, promoters have one for spreading their positive word-of-mouth. Promoters bring in new people. They talk up a company and burnish its reputation. They extend the company's salesforce at no cost. They make it possible for a company to earn good profits, and thereby to create growth that is both profitable and sustainable. Again, that's what we mean by true growth.
What is the question that can tell good profits from bad? Simplicity itself:
How likely is it that you would recommend this company to a friend or colleague?
Customer responses to this question yield a simple, straightforward measurement. This easy-to-collect metric can make your employees accountable for treating customers right. It's the one number you need to grow. That's why we call the question that produces it the ultimate question: it's the question that will determine the future of your business.
Asking the ultimate question allows companies to track promoters and detractors and produces a clear measure of an organization's performance in its customers' eyes. Bain analysis shows that, on average, increasing this Net Promoter Score by a dozen points versus competitors can double a company's growth rate.
By asking that question
systematically, empowering front-line employees to make changes in response to what they hear, and by linking results to employee
rewards, you can tell the difference between good
profits and bad. You can manage for customer loyalty and
the growth it produces just as rigorously as you now
manage for profits.
Seven rules of measurement can help calculate your customers'promoter status