Harvard Business Review on Increasing Customer Loyalty
Various Contributors
Harvard Business Review Press (2011)

How to create customers who are profitable

This is one of the volumes in a series of anthologies of articles that first appeared in Harvard Business Review. Having read all of them when they were published individually, I can personally attest to the high quality of their authors’ (or co-authors’) insights as well as the eloquence with which they are expressed. This collection has two substantial value-added benefits that should also be noted: If all of the articles were purchased separately as reprints, the total cost would be at least $60-75; also, they are now conveniently bound in a single volume for a fraction of that cost.

Those who aspire to make their customers both loyal and profitable will find the material in this HBR book invaluable. It is one of the volumes in a series of anthologies of articles that first appeared in Harvard Business Review. Authors of the nine articles focus on one or more components of a process by which to turn angry customers into loyal advocates, get more people to recommend them, increase customer satisfaction by satisfying them, focus on profitable customers (loyal or not), invest in the right CRM technology, mine customer data for more effective marketing, and increase each customer’s lifetime value.

I now provide two brief excerpts that are representative of the high quality of all nine articles:

In “The One Number You Need to Know,” Frederick F. Reichheld explains what he characterizes as “The Ultimate Question”: “On a scale of 1 to 10, how likely is it that you would recommend our company to a friend or colleague?” There are two other questions that are effective predictors in certain industries: “How strong do you agree that our company sets the standard for excellence in our industry?” and “How likely is it that you will continue to do business with our company?”

The number to which the article’s title refers is what Reichheld calls the “The Net Promoter Score.” Promoters are those who provide a rating of 9 or 10, Passives 7 or 8, and Detractors 6 or less. For purposes of illustration, let’s say 100 customers respond as follows: 35 Promoters, 45 Passives, and 20 Detractors. The net score is determined by subtracting the total number of Detractors (i.e. 20) from the total number of Promoters (i.e. 35) and that is 15. That is a baseline against which subsequent efforts to increase Promoters and decrease Detractors are measured. Reichheld calls it the Net Promoter Score (NPS).

In “Diamonds in the Data Mine,” Gary Loveman offers these suggestions when using a database to measure/predict customer loyalty:

1. Acquire a rich repository of customer information.
2. Slice and dice data finely to develop marketing strategies.
3. Identify core customers by predicting their lifetime value.
4. Gather increasingly specific information about customers’ references – then appeal to those interests.
5. Generously reward employees who prioritize levels and degree of customer service.

Other articles of specific interest to me include “Companies and the Customers Who Hate Them” (Gail McGovern and Youngme Moon), “Putting the Service-Profit Chain to Work” (James L. Heskett, Thomas O. Jones, Gary W. Loveman, W. Earl Sasser, Jr., and Leonard A. Schlesinger), and “The Mismanagement of Customer Loyalty” (Werner Reinartz and V. Kumar).

SUGGESTED  READING

The Ultimate Question
The Ultimate Question 2.0
Frederick H. Reichheld

Creating Customer Evangelists
Ben McConnell and Jackie Huba

On Great Service
Discovering the Soul of Service
Leonard Berry

The New Gold Standard
Joseph Michelli