Wednesday, May 25, 2005
The Loyalty Effect: The Hidden Force Behind Growth, Profits, and Lasting Value
The Loyalty Effect: The Hidden Force Behind Growth, Profits, and Lasting Value
© 1996 by Frederick Reichheld
On average, US corps now lose half their customers in five years, half their employees in four. Disloyalty at current rates stunts corporate performance by 25 to 50 percent or more.
It was impossible to maintain a loyal customer base without a base of loyal employees and that the best employee prefer to work for companies that deliver the kind of superior value that builds customer loyalty.
In a typical company, customers are defecting at a rate of 10 to 30 percent per year; employee turnover rates of 15 to 25 percent are common. Decrease defection rates in customers, employees, and investors.
Few business people think of customers as annuities. The goal is zero defection.
Raising customer retention rates by 5% could increase the value of an average customer by 25 to 100 percent.
Why are loyal customers the most profitable?
Acquisition cost is often negative, base profit, cost savings, referrals, price premium. Closing rates for referral prospects are significantly higher than closing rates for walk-in customers.
Acquisition costs are large because senior managers often make the sales proposal.
Most calls to the helpdesk are from new customers.
Mature companies often find that 20-30 percent of their customer acquisition costs should be scrapped.
In loyalty-based management, the sales channel isn’t just a way of attracting lots of customers it’s a way of attracting lots of the right customers.
Most companies pay salespeople for conquests, not continuity. Even if a company does compensate sales force for repeat business, most salespeople aren’t planning to hang around enough to reap the benefits.
Employees who are not loyal are unlikely to build an inventory of customers who are.
It takes time to build solid personal relationships with customers.
Long-Term employees create value by training, efficiency, customer selection, customer retention, customer referral, employee referral.
What really matters is not just making improvements, but making them faster than the competition does.
In the United States about 40% stay with an employer for 2 years or less.
Start out with failure, than engineer its removal - Buffet.
One of the most illuminating units of failure in business is customer defection.
Summary:
1. Build a superior customer value proposition
2. Finding the right customers
3. Earning customer loyalty
4. Finding the right employees
5. Earning employee loyalty
6. Gaining cost advantages through superior productivity.
For successful companies, loyalty was a matter of honor and integrity.
Amazon: http://www.amazon.com/exec/obidos/ASIN/0875844480
© 1996 by Frederick Reichheld
On average, US corps now lose half their customers in five years, half their employees in four. Disloyalty at current rates stunts corporate performance by 25 to 50 percent or more.
It was impossible to maintain a loyal customer base without a base of loyal employees and that the best employee prefer to work for companies that deliver the kind of superior value that builds customer loyalty.
In a typical company, customers are defecting at a rate of 10 to 30 percent per year; employee turnover rates of 15 to 25 percent are common. Decrease defection rates in customers, employees, and investors.
Few business people think of customers as annuities. The goal is zero defection.
Raising customer retention rates by 5% could increase the value of an average customer by 25 to 100 percent.
Why are loyal customers the most profitable?
Acquisition cost is often negative, base profit, cost savings, referrals, price premium. Closing rates for referral prospects are significantly higher than closing rates for walk-in customers.
Acquisition costs are large because senior managers often make the sales proposal.
Most calls to the helpdesk are from new customers.
Mature companies often find that 20-30 percent of their customer acquisition costs should be scrapped.
In loyalty-based management, the sales channel isn’t just a way of attracting lots of customers it’s a way of attracting lots of the right customers.
Most companies pay salespeople for conquests, not continuity. Even if a company does compensate sales force for repeat business, most salespeople aren’t planning to hang around enough to reap the benefits.
Employees who are not loyal are unlikely to build an inventory of customers who are.
It takes time to build solid personal relationships with customers.
Long-Term employees create value by training, efficiency, customer selection, customer retention, customer referral, employee referral.
What really matters is not just making improvements, but making them faster than the competition does.
In the United States about 40% stay with an employer for 2 years or less.
Start out with failure, than engineer its removal - Buffet.
One of the most illuminating units of failure in business is customer defection.
Summary:
1. Build a superior customer value proposition
2. Finding the right customers
3. Earning customer loyalty
4. Finding the right employees
5. Earning employee loyalty
6. Gaining cost advantages through superior productivity.
For successful companies, loyalty was a matter of honor and integrity.
Amazon: http://www.amazon.com/exec/obidos/ASIN/0875844480
