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Ultimate question, basic principles July 21, 2007

Posted by Steve Field in The Ultimate Question.

Although last week I said I liked the premise of The Ultimate Question, I found the more I read the book, the less I enjoyed it. The second half of the book was fluffy, so even though the concept of judging good profits by the happiness of customers and their willingness to be brand ambassadors, the way that Reichheld suggests that companies become customer-focused is a bit shallow.

The recommendations Reichheld gives for for building a company that is devoted to good profits are common sense business 101. He offers tips such as:

  • Hire and fire to inspire
  • Pay well
  • Invest in training your employees
  • And others

Nothing here is revolutionary. Each of these principles is about respecting your employees, and there is a wide body of literature existing that suggests that happy employees are effective employees and effective employees create happy customers. This is more common sense that innovative thinking. All that Reichheld is doing in his discussion about internal business structures is packaging an old concept in a new way.

Second, I found his methodology for how one calculates the NPS left me wanting. I agree that sticking to the Ultimate Question and that alone is a good way to garner accurate information from customers, but the actual metrics he prescribes are old hat — a scale of 0 to 10? A 3-point scale or a 5-point scale? Again, nothing here is new. Furthermore, if the 0-10 scale is used, as he seems to endorse, he doesn’t provide any concrete standards to apply to each number. This means that the results are inherently tied to the subjective interpretations of the respondents, which makes the data less reliable.

I’m not a complete detractor for Reichheld’s thinking. I just wish that his points were a little more original and a little more thorough.


Why one question matters July 14, 2007

Posted by Steve Field in The Ultimate Question.

I can’t think of a premise more simple, yet more revolutionary.

In The Ultimate Question, Fred Reichheld revolutionizes the meaning of the word profit by arguing that the bottom line is best served by focusing on customer needs and converting them into brand ambassadors.

In other words the ultimate question is: would you recommend our company to a friend?

The concept is so simple. But so right on. Business success depends on sales. Continued sales depend on customer satisfaction. And the highest form of customer satisfaction is the willingness and desire to recommend a company or brand to a friend or colleague.

This premise is grounded in the fundamental principle of the book The Cluetrain Manifesto. In this book (now available for free online), the authors argue that markets are conversations. The traditional approach to business communications was about talking at people — advertising, messaging, and brand development. The reality of today is that business communication does not only exist in a top-down manner. It also exists in a circular manner, with customers talking back to the company and to one another.

I like the approach that Reichheld takes. The idea of a Net Promoter Score is interesting, and seems to get to the heart of the matter — that the more likely that a company has customers willing to recommend them to a friend.

However, I am still confused on the methodology of the NPS. Perhaps that will come to light later in the book. There is a very real challenge in applying numerical metrics to a qualitative survey such as the NPS survey. Reichhart hasn’t yet disclosed his process, and I have a feeling he won’t in the book (as doing so would be like sharing the “secret sauce”). However, in order to understand how NPS works, it would be helpful if Reichart shared his methodology.

I’ll be looking for this in the rest of the book. In the mean time, has anyone else seen his methodology? Leave a comment — I would love to hear your thoughts on how NPS works.