Key Concepts: The Ultimate Question

By FRED REICHHELD

There are many good books on the importance of building customer loyalty.  What makes this book different is that is converts the soft, qualitative “feel good” side of loyalty into a quantitative methodology that any numbers jockey can appreciate.

Most of us recognize that it makes good business sense to treat customers the right way.  But what was lacking was a good way to “prove” that it makes good business sense to focus time, people, and money into building strong customer loyalty.  This is what Fred Reichheld does in a compelling fashion in his book, “The Ultimate Question”.

Reichheld explains how there are ‘good profits’ that boost a company’s long-term growth and ‘bad profits’ that are gained in the short-term at the expense of customer loyalty. Good profits take more time and effort to generate, but he shows with clear cut examples how going the extra mile pays off in the long run.  Conversely, short-term gains can be made with tactics like temporary price reductions that drive the bottom line for month, but are unlikely to build the loyal customers that produce long-term success.

A foundational principle in the book is that companies are more successful and more profitable if they build fewer, but deeper customer relationships.  It is important to attract the right type of customer who truly values what you deliver.  Then, build the relationships with them and leverage the relationship to create a return for the business.  Reichheld conducted a great deal of quantitative research to determine the best method for predicting long-term profitability in a company.  In what is a surprisingly simple result, he found that among the dozens and dozens of statistical models he ran, the best predictor of success was how customers answered one simple question.  What he calls “The Ultimate Question.”

Check out the presentation to get a quick overview!