Printed leave behind from the Holland Mark CEO Series event helping CEOs understand and apply Fred Reichled’s seminal work on customer loyalty.

1. Habit #? Headline
truths of putting NPS to
work for your business
An overly abridged view of Fred Reichheld’s
seminal work on customer loyalty

2. introduction
Since the beginning of time, the leaders of countries, companies, and country
clubs have been in search of formulas and frameworks that would guarantee
profitable growth. And centuries later, the terrible truth, the nasty reveal, is that
there are none. If there were, Greece would not be Greece, RIM would be on the
rebound, and the Catholic Church would not be selling real estate. But that truth
may not in fact be true, thanks to the seminal work done by Fred Reichheld at
Bain & Company over the last decade. An internationally recognized consultant,
author, and speaker, Fred’s work on the Net Promoter Score (NPS) has been
translated into 15 languages and rendered in several books, with the most recent
offering “The Ultimate Question 2.0.”
And what it all simply and provocatively proves is that loyalty is everything.
Brands and businesses that create (and measure) loyalty create distinct and
sustainable value that translates into higher levels of growth, profitability, and
shareholder returns. What follows is our over-simplification of Fred’s powerful
work. It’s designed as somewhere between a teaser and a cheat sheet, with the
hope that you’ll read the unabridged version and ultimately apply the ultimate
question to your business. Thanks for joining us.
And now, the 7 truths …

3. truth #1 customer loyalty: it’s the consequence and the cause
customer loyalty is the consequence of doing a lot of things right. From
motivating employees to care to taking care of every touchpoint between your brand and all
the constituencies you serve. Loyalty is not a function of “I like” but “I love.” And when you
drive higher levels of loyalty as reflected in higher Net Promoter Scores, you cause higher
performance across every financial metric: revenue, profit, earnings per share, lifetime value,
etc. Fundamentally, the most effective way to build a successful and ever-growing business
is to have loyal customers, and the best way to measure loyalty is by the proportion of
customers who will recommend you to others. 1

4. truth #2 love minus hate or ho-hum is what matters
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5. Habit #? Headline
the net promoter score and system focuses on the difference or “net”
between those who love you (Promoters) minus those who really don’t (Detractors)
without valuation of those that are just satisfied (Passives). Companies with low
NPS scores cannot compete with competitors that are generating growth through
customer loyalty (those with the highest NPS in the industry). The average company
has an NPS of 5%–10%. Companies like Apple, JetBlue, Zappos, and USAA have
scores of 50%–80%. And, not coincidentally, they are all market leaders.
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6. truth #3 S really stands for system
nps isn’t just a score or a way to measure customer satisfaction. It’s a way of
doing business, a philosophy, supported by proven frameworks and systems. To extract the real
value from calculating the score, companies must create closed-loop learning and improvement
processes and build them into their everyday operations. This means on-the-spot fixes (closing
the loop faster every time), experimentation to see what works best for you, and creating forums
where ideas that work can be shared. NPS customer feedback needs to be hardwired into key
decision processes in all aspects of the organization. It’s not treated as a separate department
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or program, but fully integrated/infiltrated into the fabric of daily and monthly priorities.

7. truth #4 give the power to your people
there is a direct correlation between organizations that have high employee loyalty
and those that have high customer loyalty. Many of the leading NPS-led organizations measure
the Net Promoter Score of their employees. Understanding their loyalty and empowering them
with the tools and latitude to create customer loyalty is key. When there is individual motivation
and concomitant accountability, things will get done, better decisions will be made, and better
outcomes will be achieved by all for all.
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8. truth #5 all profit is not created equal
fred’s work clearly shows that in any organization there can be “good profits” and
“bad profits.” Bad profits are the consequence of activities and offerings that ultimately alienate
customers by taking advantage of them, charging them nuisance fees (flown lately?), and forcing
contracts that trap them (I don’t want my DirectTV). Bad profits undermine the virtuous cycle of
loyalty economics and demoralize employees in the long run, diminishing inspiration, resulting
in a downward spiral of bad service and false and fleeting economic growth.
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9. truth #6 the answer is everything
driving higher customer loyalty and higher Net Promoter Scores is not the responsibility
of marketing, or finance, or operations. It’s the responsibility of everybody and the consequence
of everything. The board must be on board. The CFO must care. The front-line staff must under-
stand. It’s about bringing every aspect of the organization to bear on the task of creating distinct,
relevant, and sustainable value for the customer. It’s economic, experiential, and at times even
a little bit spiritual.
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10. truth #7 NPS begins and ends with you
it must be the centerpoint of your business strategy and your day-to-day decision
making. NPS is the flag you plant, wave, and rally around. You will need to intimately understand
and relentlessly convey the economic and moral imperative to deliver more value. It’s not a
rainy-day activity or even an annual event. It’s a long journey and commitment to cultural change,
organizational synchronization, and singular focus on what really matters to your customers
and your employees.
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11. Habit #? Headline
a final note and a thank you
As Fred so aptly points out, the fundamental truth behind these seven truths and the
entire Net Promoter System is the golden rule: Do Unto Others As You Would Have
Done Unto You. When you do, and when your organization does, good things, really
good things, will happen.
Thank you, Fred.
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