Monday, March 31, 2014

Book Summary: The Ultimate Question 2.0 by Fred Reichheld.

Last summer I asked Nick Besbeas (LinkedIn's CMO) if he could recommend some marketing books for me to read to prepare to come back to LinkedIn after I graduated. I just finished one of the first books, The Ultimate Question 2.0 by Fred Reichheld.

After reading each book, you'll get a post that has my key takeaways. Here they are......

Avoid "bad profits" at all costs. Bad profits are "profits earned at the expense of customer relationships." A great example of bad profits are the late fees from Blockbuster. Late fees were one of their biggest sources of profit. People were all too eager to abandon Blockbuster for companies like Netflix, who took advantage of Blockbuster's mistake. Netflix built their business off of the mantra "no late fees". Bad profits is one of the main reasons Blockbuster went down in flames.

Current accounting systems encourage bad profits. The book highlighted that current accounting systems do not distinguish between bad and good profits. This makes having another measure that you put alongside your financial reports extremely important. Naturally, the book recommended net promoter score

Net promoter score is a simple way to measure customer satisfaction. Net promoter is a customer satisfaction methodology based on one simple question you ask your customers. That question is "How likely is it that you would recommend this company, or this product or service, to a friend or colleague? Most often used on a scale of 0-10. This helps you bucket customers into detractors, passives and promoters.

Though the concept is simple, it is extremely difficult to implement. The companies highlighted in the book as successful users of the net promoter methodology all had large initiatives supported throughout the entire company to focus on using the net promoter score. For the system to really work, everyone from the management to the front line workers need to be committed to trying to create promoters among their customers.

Customer obsession is the winning strategy. Net promoter score, when implemented correctly, is a great forcing function to get the whole company thinking about whether they are creating positive customer experiences everyday.

This is fantastic book if you thinking about revamping how you measure customer satisfaction at your company or thinking of adopting the net promoter score methodology. Anyone that has to create customer satisfaction surveys for their job should read this book. Tactically speaking, if you're creating surveys the shorter the better and this one simple question can tell you a lot.


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