Welcome to “Let’s Talk Loyalty”, an industry podcast for loyalty marketing professionals. I’m your host, Paula Thomas, and if you work in loyalty marketing, join me every week to learn the latest ideas for loyalty specialists around the world. Hello and welcome to today’s episode of let’s talk loyalty with a guest who has been described by the economist magazine as the high priest of loyalty, and by the New York times as the man who put loyalty economics on the map, Fred Reichheld a fellow at Bain and company is most famous for creating the net promoter system.
48s
1
The framework now used by over two thirds of fortune 1000 companies to measure their customer loyalty. He is the author of four previous selling books on driving customer loyalty. And today he joins me to discuss his latest work, a fascinating new book called winning on purpose. Now, as you can imagine, it was a real privilege for us and let’s talk loyalty to get an advanced copy of the book for today’s interview. And I can honestly say the key messages in it were both unexpected and powerful. Fred believes it’s time to challenge the very fundamental idea about the primary purpose of a business, which he says is not to drive profits per shareholders, but instead to enrich the lives of our customers, his profoundly new approach is actually also incredibly profitable.
1m 44s
1
So in this interview, he shares how it works, why it works and also introduces his latest tool, a new framework to support net promoter score called the earned growth rates. Fred describes it as the accounting twin. We need to ensure that every business leader is crystal clear on the power and profitability of delighting customers so that they come back for more and bring their friends. I’m honestly thrilled to bring you today’s interview with an industry legend, Fred Reichheld and share his work winning on purpose.
2m 28s
1
So Fred Reichheld, I know it’s a stormy day there with you today. First of all, welcome to let’s talk loyalty. Nice to be here, Paula. Great to have you. I’m a big fan of your work, Fred. Thank you. So we have a lot to talk about, and in terms of the book winning on purpose, literally released two days ago on Amazon. And, but before we get into talking about all of the new concepts in there, particularly I suppose the mindset of loyalty and all of the amazing work that you’ve developed over the last, I think it’s 10 years. In fact, since you wrote your last book isn’t indeed. Wow. Okay. So we’ll get into all of that, but before we talk about the book itself, first of all, just tell me, Fred, what is your favorite loyalty statistic?
3m 9s
2
Well, for many years it’s been net promoter score, but I think in the last year is transitioning at least equally to the earned growth rate. The, the actual accounting measure of how much of a company’s business is derived from companies coming back, constant customers coming back for more and referring their friends. They’re kind of, you can almost think of them as twin metrics, one supports the other, but I really think we need an accounting driven hard metric for accountability and, and, and pushing loyalty even further toward the science.
3m 45s
1
Yeah, you’re absolutely right, Fred. So yes, I was expecting and net promoter score to be the obvious choice. And you created that metric. I think it was 2002 now, nearly 20 years ago. Am I right? Yeah. Wow. So, and I was looking through there’s I think over two thirds now, fortune 1000 firms that are using NPS as a framework, I think with varying degrees of success. And I think that’s something that we do need to probably talk through. I know it’s an area you’ve lot of pride, but I think also frustration around in terms of how it’s executed, but just because this is a brand new invention, Fred talk us through earnings growth ratio.
4m 25s
1
I fundamentally agree with the, the need for an accounting based principle. I think it’s something in the past I have suffered from extensively in fact, is to be able to articulate to colleagues in a finance department as to exactly the value of the investment in our work and loyalty. So can you talk us through what you’ve invented now with the earned growth rate?
4m 47s
2
Yeah, I’d be happy to, and I think it probably makes sense to start with first principles. I, for, for many, many years have, have come to see that great businesses are built on love, not grade, and yet all of this serious metrics that we use for running those businesses and holding people accountable are based on greed that the financial system essentially orients toward profits for us. It’s how much can we extract from our customers’ wallets? And of course it’s necessary to have a sustainable business to, to be profitable. And yet when the 99% of the reliable metrics are focused on that issue, it then greed, overwhelms love, and, and, and you lead, it leads you down a path.
5m 39s
2
That’s essentially the self-destructive. I think one of the reasons businesses get to such a large scale and then collapse is because they become the larger, they get, the more they’re run through the communication and mindset created an enabled by accounting numbers. So the reason for net promoter was this idea that, well actually, if businesses are real fun, love and enriching the lives of our customers, enabling our teams to lead lives of meaning and purpose through great service to customers. So great. It enriches their lives, that set of ideas. You really have to measure that. And, and, and I started down that path with net promoter, just, you know, how many people feel like their life has been enriched.
6m 24s
2
Those are promoters. How many feel like the company has diminished their life? Those are detractors. So net promoter score I could have called net lives enriched, but you know, it is what it is. And I think one of the reasons it’s two thirds of the world using it, according to fortune magazine is business people get it. They want promoters who come back and buy more and bring their friends and fewer detractors. But I think what inspires employees is of all the lives we touch, how many are enriched, how many are diminished, and that’s what drives each individual human that, you know, their soul is based on that objective function on love.
7m 5s
2
So this has been the journey and, and so many people have adopted net promoter and then misused it, they hold people accountable to this inherently soft survey score and it’s, and then they stop caring about loving their customer and learning how to take the feedback and get better. They just want a score because their boss is going to fire them. If they don’t get a good score. And that then destroy as much of the value of the system I’ve preached against that. I’ve said, gee, never linked this to your frontline employee bonuses or their employability never post all the results and humiliate the bottom core tile, because all that does is make sure that they’ll bribe or plead or gimmick their way into an acceptable score and learn very little from the customer and probably leave the customer feeling the less love for the company.
7m 59s
2
Yeah, the love your customers feel it being expressed in coming back for more and bringing their friends. And that is calculable. I lay it out in a HBR article and in the book, and I hope that that can become the focal point that eventually becomes even more important than a current profits as a metric that inspires good behavior and attracts the kind of employees you want and need to, to attract and retain. If you’re going to live in this digital world,
8m 31s
1
Fred, you have used the word love a lot in the, in your discussion about what makes companies successful. And I have to say going through the book am I obviously loved to see that coming through because it’s something that as human beings we can all connect with, but I don’t think it’s something that I’ve seen in very many business books with the obvious exception, with the likes of obviously saying, you know, we love apple products or something in a quite M generic kind of way. Well, what kind of response are you getting now that you’re talking about truly loving your customers as a mindset from management?
9m 7s
2
Well, it’s still a little bit early to tell since the book was just released, but I certainly within Bain and company and the people I deal with, I think they understand that that higher standard is actually the right target, the right objective. And in fact, it is necessary for great organizations that, and I started the book with my recognition, that great leaders that I’ve met over the years and have built these great organizations that earn enormously high retention rates and, and high, the highest net promoter scores.
9m 50s
2
The leaders of those companies did not set out to earn their customers loyalty. They w they, they loved the, they wanted to treat their customers so well that they would come back for more and bring their friends. And, and that second one bring their friends, refer their friends is an act of love. The reason, the reason employee, or excuse me, the reason a customer recommends to a friend or refers to a friend is because they want something good for that friend. They think they’ve discovered an experience that will enrich their friend’s life. Yeah. And, and that’s, it’s that cycle of love that is at the center of, of great human relationships and, and, and great corporate complements.
10m 38s
2
So, you know, love, you got to define it. People say, oh, I love my wife. I love my dog. I love ice cream. There’s a lot of love out there. The kind of the kind that I think is meaningful in this arena is the kind of love. I mean, it’s almost a religious thing of getting, you know, the Jesus message of love thy neighbor as thyself. It is your happiness is derived by how much happiness you can create in your partner or the, the person you’re you’re serving the person you care about. And, and when you think of happiness being derived through happiness someplace else, a story that comes to mind is Scott Cook, who joined Bain and company about the same time I discussed the founder of Intuit, huge, $150 billion, $200 billion market cap, success story.
11m 30s
2
And with TurboTax and QuickBooks and so forth, Scott has regularly said, Fred, we don’t deserve a dollar of profit until we’ve made our customers happy. Wow. And it sounded a lot like Truett Cathy at Chick-fil-A completely different guy, but he, his happiness came from turning frowns into smiles. He wanted to solve customer problems and make their lives better. And this was not all about getting rich. It wasn’t all about mechanically manipulating the repeat purchases to get rich. It was, I want to make people happy.
12m 12s
2
And then the last example I use is a general Harries who ran the USA for a long time, former vice chairman of the joint chiefs. He said, Fred, you know, good generals. They care about their troops. They, you know, they want to make sure that they understand their mission, that they’re there. They embrace the mission, they have the tools to get there. But then my job as a leader is to care for them to, to, to care for their safety and their wellbeing. And when a leader loves there and Chuck Krulak who ran the Marines for a long time, was the other guy who said, if it’s loved Fred, that you inspire loyalty through love, love, begets loyalty.
12m 55s
2
And if it works in the military, I have, you know, I have a feeling that works in business and in life.
13m 1s
1
Wow. My goodness. Well, yes. I think that’s the most extreme example that you’ve used Fred. So I haven’t had any experience with the military, but, you know, for, for that mindset to be so laser focused on, on caring. And I know in the book you referred to it as the golden rule. And just to refer back to, I suppose, the, the referring to a friend piece as obviously net promoter score is defined and asked very articulately around what I’ve always loved about that framework was it was that person, first of all, putting their own reputation on the line, because I think we’ve all experienced the risk of recommending something. And you only do that when you absolutely believe it’s the best thing.
13m 44s
1
So, so I loved that jewel aspect of it makes me look good. And I can share that experience with somebody that I know they’re going to be super thrilled and we’ll both benefit.
13m 53s
2
And it’s sort of the magic of that, of that loyalty based business or love-based business system that out of nothing, you know, what does it cost to a friend to, to refer a friend, very there’s risk involved, as you say, it’s your reputation, but if you can find something that will enrich the life of a friend or a loved one, and it costs you nothing, except that advice. And then that friend does have a wonderful experience. It’s, it’s like magic it’s that’s value creation. And I think it’s that that little engine that loved it has this economic flywheel that is so poorly understood in business, but is the source of all great successes.
14m 39s
2
I know because they all have that simple flywheel at their core. They treat customers in a loving way. And when those customers feel the love, they come back for more and bring their friends and that little cycle, which accounting doesn’t measure very well at all is the core. Whether it’s a Costco or an apple or an Intuit or an enterprise rent a car, it’s the same drive in flywheel that has driven, that has resulted in their astonishing growth rates and profitable generation of cash. So know with these metrics there, the net promoter enter and growth.
15m 19s
2
My goal isn’t just to help companies get more profitable. That’s a, that’s an outcome, but it’s it’s to understand the core driver of success and human relationships and in, in business relationships, because it’s so poorly understood today because it hasn’t, it’s just not measured very well.
15m 38s
1
Yeah. And, and you’re absolutely right, Fred. And I’ve said many times, you know, customers feel it when the management intention is to be of service. So that energy of love is very difficult to articulate without something like the earned growth rate. So I think what you’re doing is giving us that facility to, I think what you said, first of all, is capture at the start of a customer relationship, the source of where they’ve come from so that we can start to understand how much value have I earned from people, bringing their friends versus how much have I had to go out and buy in terms of other marketing activity or customer acquisition.
16m 19s
1
So I think that’s the huge shift in terms of how the business community is going to start to respect earnings growth rate, a new framework.
16m 27s
2
Yeah. Some brilliant, intuitive leaders. Tony Shay comes to mind, tragically died last year, but it was the CEO of Zappos for a long time. He, he told me Fred marketing and sales and advertising. Those are attacks you have to pay for not being special to your customers. Wow. And that mindset that, gosh, I thought that’s how you grow a business. You know, you hire a Salesforce, you pay sales commissions, you, you have marketing gimmicks, you have loyalty programs. You have all this expense, but no, that’s only if you, if, if your customers don’t feel the love because when they feel the love, they come back for more and bring their friends.
17m 11s
2
And that starts this flywheel humming that makes it very, you really don’t need much marketing and sales and advertising expense. When you’ve got that flywheel spinning, you need a little, but sure. Or just remind people of what you stand for because the world operates on this financial mindset. You know, business is about greed and self-interest why do so many people distrust capital, but some today, because they run it through the financial metrics of greed and self interest and the great ones, of course, they know how those economic metrics work and, and sustain them. But the core fire that’s driving them as love making their customer’s lives better.
17m 53s
2
And that’s why good people want to work there. And why can they pay them more? Because they’re not paying Tony Shay’s tax accountants, don’t calculate them that way. So until we start really having a deeper economic understanding and, and I, and earn growth is good because how do you know where their customer feels the love? Well, they come back for more and they bring their friends. And those are the things that we measure. And one of them is simple, you know, coming back from work, but maybe simple an overstatement, but net revenue, retention rates is not a brand new idea. You just want to see how much your current customers are giving you in the next period.
18m 35s
2
The trickier one you mentioned was how do I track this referral flow? Cause that’s even a higher standard. Sometimes I’ll go, come back for more, just out of laziness or, yeah, I bought the software. I’m not going to shift now. It’s like monster effort or change banks. Oh my God. I had so much, how much time do I have for administrative bureaucratic detail re redoing all my bill pay addresses. So the referral is actually the higher standard because it’s from a fresh start. Would you recommend this to a friend? And we don’t track that today. We just counted as, oh, it’s extra credit and no, it’s actually the core of this whole thing. And so earn growth. As you’ve seen in the book, I show a very practical way of keeping track of referral flows.
19m 20s
2
Every time a customer comes in the door and as new you ask them, whether it’s online or a human being, what’s the primary reason. You’ve decided to do business with us and you might give them a few choices. But when they say referral recommendation, that is an earned customer and you should keep track of that and put that in the customer record. And you’ll find, I think the economics, the behavior and the economics of those earn customers are wildly different than the bot customers that the accountants are completing into one new business number and a confusing things.
19m 56s
1
Yeah. And I just want to add to your, to your comments read because Seth Goden is another very famous marketeer that I’m sure you are very well aware of. I’m sure you’ve probably even done some work with him, but just at the end of October, he sent out his usual blog post and the closing line of this particular one, I just thought, I’d read it to you, Fred, because it’s exactly what I’ve been meeting in your book. And he literally said the single biggest marketing bargain remains a customer who chooses to recruit new customers. And I thought, my goodness is Seth Godin saying it. And Fred Reichheld is saying is, I mean, I think it’s really time for the world to sit up and pay attention to this new way of doing business.
20m 37s
2
Yeah. I, I, you know, golden is a brilliant thousand times more famous than I am, but you know, he’s had an enormous impact. The thing that separates me, you know, I, I think you have to measure it and, and now we have a way to measure it and therefore bring it to life and have it appropriately valued. Totally.
20m 56s
1
Yeah. And you used another term as well. A couple of times read throughout the book, which I think again probably needs to be part of our language going forward and you’ve just called it customer capitalism. And so I think that’s a very big shift as you’ve talked about from the traditional way of measuring success of a business and through all of the financial capitalism. So when you just explain customer capitalism and why you think that term is important to be, to be using.
21m 27s
2
Yeah. I think the historic financial capitalism that has a lot of Milton Friedman mixed in about the purpose of a company is to maximize shareholder value. And then certainly all of the governance systems on the public company boards I’ve served on, we spend 80, 90% of our time on financial metrics and audited numbers. It’s when you’re thinking about doing a deal with acquisition or, or selling you, you get reminded by your lawyers. Look, if you don’t have a clear evidence, clear evidence that you’re acting in your shareholders, best interests, you’ll go, you’ll get sued. So there’s people out there reminding you that the most important, or let’s say that you, you mess up on the numbers that you report to wall street.
22m 12s
2
Now with Sarbanes, actually you can go to jail. So there is an incredible scrutiny of financial numbers and that’s how I’ll governance. That’s how companies behave. That’s how we allocate our capital. That’s how we pay bonuses. And so you can’t just be, you know, you can’t have that running in your circulatory system and think clearly about love as the core driver and referrals. Cause we don’t even know how to measure those things and I’ll go to jail if I screw up on profit. So that must be really important or you’ll go bankrupt, you know, bank or the bankers know you Dells call your loans if you’re not meeting your covenants.
22m 53s
2
So this notion of, I need to create a mindset where people see how capitalism evolved from this old financially-driven capitalism to one word, customers are the true currency, because when you think about value and economic terms, the value of a firm is what customers pay you in, in, in, in terms of coming back for more and bringing their friends. That’s, that’s where all the value comes from. And that when you start thinking about that as this, the real, the restrained resource in, in, in growing a business, you start saying, well, there’s plenty of capital floating around the world.
23m 35s
2
And, but, but we’ve, there’s not funny customers who want to do business with us and not are referring their friends. So it it’s a mindset shift to it, to the economic system that I think is the, is the accurate one for today. And, and it’s a big sh you know, it’s not just a little shift, it’s a rethink of the purpose of a business. I mean, it’s not to maximize shareholder value. I know that sounds communist or socialist. Yeah. But, but those companies that love their customers the best are the ones who are delivering the best returns to shareholders. Just, just read the book if you’re, if you’re skeptical of that.
24m 12s
1
Yeah. And the, and there’s two statistics I’ll directly quote Fred from the book. So first of all, you reference another book by a gentleman by the name of Jim Collins, who had written a book called good to great, and which I believe sold over 5 million copies. And that would be, I think, a very typical example of the financial capitalism approach of the past that we’ve been talking about. And, you know, again, with the benefit of your, your colleagues in Bain, you’ve obviously looked at the total shareholder return of those firms. And the statistic is quite shocking in fact, that those companies, which are literally, you know, identified as the great ones, literally only achieved 0.4 times and the total shareholder return of the media U S firm, whereas the 11 public firms that you am have been measuring in terms of the ultimate question, 2.0, outperformed the stock market by more than five foes in the decade after you published that book, that should be evidence enough alone, Fred, that there’s a different way that we need to look at this.
25m 15s
2
Yeah. When I did that analysis or, or the main team that did that analysis, I was stunned. I had heard rumors that, you know, all those companies that the Jim and Jim Collins, another, just a total genius, what an impact on the world he’s had. But I think, I think I added two to maybe improved for the mindset that, that he developed with good degrade because those companies that he based, the 11 companies on which, which he used as exemplars of these, the rules that were so powerful, I mean, 5 million readers. That that’s a, I mean, I think only the Bible outsells that that’s incredible.
25m 59s
2
And, and yet the exemplars or mostly horrible performers in the decade, right. Starting when that book was published, as you said, their stock performance was only 0.4 0.5 times. The median of so mediocre would be media. So these guys are worse than mediocre. And many of them were sending people to jail and monstrous government fines. So from a moral point of ethical, they were horrible. And of course there were several really good companies in there. So this isn’t painting all of them, but the vast majority are not companies. I want my kids to be working for right now.
26m 39s
2
And, and that, and yet that’s great. And in the, of when you, you know, why were they chosen? You looked at the financial performance and stock price performance of these companies that went from mediocre to some big improvements. And man, when you just look at the financials, remember financials, help us measure how many million dollars we’re extracting from our customers’ wallets, but they don’t tell us when we’re enriching the lives of our customers or when we’re providing our employees with inspiring, meaningful work. And those latter two things are fundamentally more important in defining greatness. Yes. And then, you know, the economics prove it out.
27m 19s
2
As you point out the, I went back and looked at the stock price performance of the 11 public companies in the ultimate question, 2.0 my exemplars, five times the stock market, medium over the 10 years, starting with the publication of that book. And you go, wow, that’s amazing. And people are blind to this. W w what is gold? We are so blinded by the financial mindset and the wall street Journal’s take on success and greatness that we’re not seeing. The underlying customer loves flywheel that is really driving long-term success.
28m 1s
1
Yeah. Yeah. And I loved your title, actually, Fred, in chapter two, where you talked about your purposeful theory of investing and you use a lovely acronym, which is the Fred stock index, Fred C I think, is the acronym, and which is all about foster recommendation, eliminate distraction, and obviously tracking then the total shareholder return, as you said, for that portfolio of companies. And again, as you said, extraordinary results with the benefit of hindsight, it sounds so obvious, but obviously, you know, the, the metrics in place at the time helped you foresee where the customer love would drive the tilt of shareholder returns.
28m 42s
2
Yeah. And, you know, winning on purpose, it makes the argument that loving customers is, is an unbeatable strategy. And we can measure that when net promoter is measured correctly, it measures it quite well. And, and, but it’s hard to measure. You need large panels, you know, thousands and thousands of customers who are on a panel and through double blind research. So you can get accurate unbiased responses. And we didn’t have that for many years and band invested in a new business called NPS prism, which develops that kind of the gold standard, excellent NPS data.
29m 22s
2
Now we know who’s best in each of these industries as well when NPS prism adds a new industry. And x-rays it. I know who the NPS leader is. And when I find a company at the top of the charts like that, where the leaders clearly through their statements, believe in this taking, you know, customers first, I invest my personal money. I’ve been doing that since I wrote the ultimate question. And my S my returns on that portfolio have been essentially triple the, the Vanguard index fund over the last decade, if you want it. And now everyone’s spouts these kinds of statistics. I looked on Morningstar, which, which tracks all of the ETFs and mutual funds that are easily available to the public.
30m 8s
2
No fund came close to my returns. Cause if you take that tripling of the stock market that essentially gave me 26% per year, a rate of return on my investment in customer loves leaders, the closest mutual fund that was at about 19, that was the best of all the thousands of funds. And here I am sitting at 26 with my simple little strategy on investing in my Vanguard brokerage account. Each time I find it NPS leader. So once again, that’s pretty powerful evidence. You know, even though I have told a number of people about those results, I don’t have investment analysts knocking on my door, trying to strike a deal with me to, to let them invest.
31m 2s
2
You know, it’s just, the mindset is so
31m 6s
1
Powerful
31m 8s
2
That they come up with different explanations and, and, you know, it started with the 11, the ultimate question companies, but we’ve added seven or eight more. I, I, Tesla steam glycan way, overvalued puffed up stock, where it’s always on the news. But then when that, when NPS prism showed that they have 10 points, higher NPS than any of the other car companies, they said, Hmm, this is could be a, this is Amazon 10 years ago. So I invested in Tesla does, you know, does more, a hundred percent of the time, but darn close, because when you got that little flywheel running at a better cycle back for more and bring their friends, you can screw up a lot of decisions and still recover.
31m 58s
2
And that has driven it’s, it’s the most robust economic engine around. And it’s, it’s wildly undervalued by the analyst community. Cause they, they just, their mindset does not let them see it.
32m 11s
1
Yeah. Yeah. It’s very early days red. I think that is something that’s going to take perhaps a generation or two dare I say. Well, what I did love in the book is that you do give so many case studies and as somebody who doesn’t even live in the U S or, or, or really, I suppose, do even a lot of work there, it’s fantastic to see brands that I know by reputation. So you mentioned Tesla and you mentioned a new em credit card by the name of, and which was beating American express and extraordinary case study at Chick-Filet and chewy, another particular favorite. So I’m a cat parent, Fred, I know you have fish and we definitely have to talk about the toy story, but, but I, I had even been aware of chewy as M how well it loved its customers from bizarrely, a post on LinkedIn.
33m 4s
1
And again, I know you’re extremely active on LinkedIn and have been an influencer there from the very early days, but literally this approach, the chewy has, for example, to understand if a customer calls up to council, perhaps a subscription for, let’s say food for a pet, if the pet has passed away, but they have an entire team dedicated to sending flowers to that customer, or really reaching out to, to express their genuine sympathy that a pet has passed, rather than obviously the historic mindset of, as we talked about financial transactions and losing a customer, they’re really focused on loving what that poor person’s going through. And I saw that on LinkedIn even way before I read your book.
33m 46s
2
Yeah. I was struck, I know chewy is a great example of a pure online pets, food and medical supplies for pets. So no human face-to-face touch. And yet there, their net promoter score showed up in our, in Bain’s rigorous research as being it’s in the book. And I can’t remember the, but let’s say 20 points, you know, it was a huge advantage versus Amazon and Amazon’s pet business. And so when I saw that, I said, whoa, this is a special company. And, and I, I talked to friends who were chewy because my daughter is a two-week customer and you find out, oh my gosh, this is another Chick-Filet, this is another Tesla.
34m 30s
2
This is another enterprise. Wow. Look at what they’re doing for their customers. And, and, you know, so I invested in it and we’ll see how it does, but at the core, I think they’ve got the right strategy.
34m 43s
1
Yeah. And when you mentioned there is Amazon, and again, in the book, you talk through, you know, so much of what Amazon does, right. And we all know Jeff Bezos, you know, was customer obsessed and laser focused on creating value for his customers. And obviously there’s a change of guard now in Amazon and what you did identify one particular area that Amazon doesn’t seem to have in the past focused on, and that you feel was really missing in terms of their overall vision. So I’d love you to, just to talk through the Amazon principles as you understand them, and maybe what else you think they need to be thinking about?
35m 23s
2
Yeah. I use Amazon as an example, at large example, and in the chapter on, on living principles that I think if, if you’re in a, if you’re a leader of a company and you want your employees to be inspired, to embrace the mission of loving customers, you got to build a culture that reinforces that and puts that front and center. And Amazon has done a brilliant job of laying out those principles, linking them to who they hire, how they promote people, coaching and feedback and training. It’s all around these principles that, and the number one, the overarching Uber principle is, is customer obsession.
36m 8s
2
They always act in the customer’s best interest. And, and yeah, I think they have room to improve on how they treat employees and how they inspire employees. Although I, I have a feeling it’s more of a mixed track record than the press leads. It leads you to believe that I haven’t found a person that works for, or worked for Amazon, that I personally know who didn’t feel like their time. There was a great move for them. Okay. Warehouses, I, I just know when I read and the lesson, I, I tend to trust a lot less of what I read because only, you know, journalists put stuff that’s newsworthy and it tends to be tale cases.
36m 50s
2
They don’t put Everage cases. And so we’ll see. And I think Bezos obviously thought it was under emphasize the added a couple of principles around treating people. Right. And, and being a great place to work, which I, I think is a very wise amendment to their list of principles.
37m 13s
1
Yeah. And you’re right. I mean, and it’s a grace an opportunity to, to review, I suppose, how Amazon launched Amazon prime, for example, and again, looking at industry leaders like Costco, who, again, you’ve explained port customers, absolutely. Top of the list of priorities. And again, quite surprisingly, or shockingly, eh, you know, investors of the bottom of that list in terms of where they focus their energies. So I do agree Amazon does so much so well and does get some bad press, which is perhaps inevitable for a company of that size, but there was a genius piece as well, tread that I taught. I loved that you included how employees are encouraged to come up with concepts to wow.
37m 57s
1
Customers based on writing a simulation press release. I thought this was a genius idea.
38m 3s
2
Th there’s a few genius ideas inside Amazon really, really genius. And of course, you know, they measure net promoter with the rigor that a Bain would use in. They look at the competitors and it’s double it’s blind. So you don’t get biases and you get the appropriate sampling and they’re, they care. They want to be number one in NPS, in each core segment. And then they’ll, they’ll, they’ll drive their, their, their strategies and their priorities accordingly. The thing, one thing I mentioned in the book, but I, I think most people will miss it. I think they have a brilliant system of employee feedback rather than just blasting out this annual employee survey.
38m 48s
2
Once a year, they ask one question a day, their employees, when they open up their computer and the screen, there’s one question there that they have to answer not right away, but before noon. And so they’ve got this constant dialogue where they’re learning from employees, what needs to improve, what do we need to do differently with customers? What’s, you know, what are we living these principles? And that is genius, but I’ve never heard anyone talk about it before it’s as if it doesn’t even exist.
39m 19s
1
Well, there you go. You’re talking about it now, Fred. So that’s amazing. And just as you mentioned, your colleagues there in Bain as well, Fred you’re obviously you’ve, co-authored this book in fact, with two of the, and the leadership team there in Bain. So I’d love for you to tell us a bit about Darcy, Darnell and Maureen burns.
39m 39s
2
Darcy is the head of our customer practice. She took on that role from Rob Markey, who was my co-author on the ultimate question 2.0 and whose podcast you’re familiar with. And then Maureen is a senior partner in the Boston office who has focused on net promoter and customer issues, almost exclusively over her go, I don’t know if she’s been here 10 or 20 years, but I’ll let you know a long time. And they, they, they made such enormous editing improvements to the book that at some point it became nuts not to include them as, as, as coauthors cause they really did.
40m 22s
2
They shaped it in a very, very important ways. And, but, you know, there were so many bandies who shaped this book. We haven’t had a tutorial board. I think there were 10 people that read the book and gave feedback Darcy and Maureen went way beyond that.
40m 37s
1
Wow. And beanies, that’s obviously the name for people that you work with together. Yeah.
40m 42s
2
Yes. I guess it’s sort of an internal that, that’s what we call ourselves.
40m 47s
1
I like it. And you have 44 years there. Fred. That’s absolutely extraordinary.
40m 53s
2
Yeah. It, well, I went half time with a band fellow role 25 years ago and it really let me focus on writing and research. And when I do work in consulting with teams, it’s always in areas that I think I can make a difference in. It’s sort of cutting edge work, cutting the greatest challenges around customer love and customer loyalty. So it, it it’s worked. It’s worked very well for me, but it is. Yeah. It’s a long time I’ve been able to watch the firm in the early I joined. Let’s see how old was banned. When I joined, it was probably like four or five years old.
41m 33s
2
The founders broken away from Boston consulting group built this little startup and, and you know, today it’s multi-billion dollar firm with offices all around the world. And I tell the story that in the nineties, I think we, we took on this financial mindset to a flaw and almost went bankrupt. The firm almost exploded. And, and how we got it back on track is very instructional. I think, to anybody who feels like, geez, oh, my employees are quitting and I don’t know how to hire, how am I going to get things back on track? Yeah. Well, we’ll read that. I think it’s chapter four if I recall correctly, but it goes through the Bain disaster, the turnaround and, and how the new leadership thinks about culture and values and how to build those into on persistent systems drive, drive priorities through the organization.
42m 32s
1
Okay. Okay. Yeah, no, it is. It’s an amazing story. And I already alluded to it as well earlier at Fred, but we, we did have a great insight in terms of how your daughter, Jenny added one question to your NPS, which I know you found totally outrageous initially. And Ben actually contributed that she was actually quite right in what you did. So just as a final piece on NPS, do you want to tell us just a bit about what Jenny started doing in terms of measuring the net promoter score, where she herself was working?
43m 5s
2
Yeah. Jenny ran the, the customer feedback process and the, the phone center and the number of functions for a, for a big wine retailer in the U S maybe the big, maybe the biggest. And, and she, she was, she was using the net promoter approach in a very effective way. I thought. And I’ve even used some of her examples and stories in the book and in articles. But one day she said, dad, you’re not going to like this, but we added another question to the survey and I’ve heard this so many people turn the two question, net promoter survey into a market research project with 20 questions.
43m 47s
2
They just can’t stop themselves. And so I was, I had a pretty fixed reaction that this was a horrible idea, but she then showed me the facts that gee, it was a great idea. So now I, my standard approach for the net promoter classic is a three-question survey. It asks how likely you’d recommend this to a friend zero through 10. What’s the primary reason for your score. And, and then the Jenny question is, and, and it’s only for the promoters and, and passives. Is there anything we could’ve done to make your experience more remarkable? And I used to think wouldn’t, they have put that in the second thing, because these are there’s one scoring question zero to 10, and then an open text.
44m 32s
2
And I told Jenny wouldn’t people are going to put an idea there. If they, if it’s important, she said, no, they don’t because they tend to put things like explaining why they’re happy. Like, oh, Cynthia at the checkout was so wonderful, but what you don’t get is, is there anything else that could have made your experience better? And people think they say, yeah, that craft beer that I used to, like, it just, it’s not there anymore. Or, you know, the light over, over the parking lot over or over on the north side is, has been out for three months. So you get feedback from your best customers, people who care about you, your promoters and passives, and, and it often is those that’s where the gems are hidden.
45m 12s
2
So I call it the Jenny question and I think most companies should ask it.
45m 17s
1
Brilliant one. Brilliant. So, listen, we’ve talked about NPS, of course, extensively now Fred, and we did, I think a great ad piece as well about earned growth rates, but the other big topic, I suppose, just in closing that I wanted to touch on is the golden rule you alluded to it earlier from I think, a biblical perspective, but would you mind just explaining exactly the golden rule? Because I think that articulates and encapsulates exactly what winning on purpose is all about.
45m 45s
2
Yeah. It’s an entire chapter in the book and how presumptuous is that? Right? Fred deciding he can add on this thousands of years of wisdom, that one goes back to Confucius, but it’s more of just a recounting, I guess. But I think the golden rule correctly understood is, is the, the, the gold standard of human relationships. It’s, it’s, it’s the highest standard we have had evolved from. Don’t do bad things to other people. That’s the Confucius. And, and I think even the, the, the Torah would, would state it that way. Don’t do bad things to others, but then Jesus is credited with raising the game to love thy neighbor as thyself.
46m 30s
2
And I think that transition is brilliant and it is the difference I see in great companies. They don’t just satisfy customers and then grab as much money from their pockets as they can legally, they, they try to, they love customers and make their lives better and, and grab enough money from their pockets to make sure they’ve got a sustainable business system and they can pay their employees well and give investors a fair return, but any overage goes back to the customer. So they’re maximizing value for customers. And it’s so different that that notion of loving customers in a golden rule away and what, you know, what separates great leaders and great companies is their moral, ethical standards.
47m 19s
2
It’s not brilliant strategies because strategies come and go technologies come and go. What seems to have permanence is teams that are committed to living up to this golden rule standard of how they treat each other and loving their customers. Yeah.
47m 39s
1
And as we said already, Fred, I know this M this particular book has already been 10 years of work since your last book. So there’s plenty of thought and deep thinking obviously gone into it. But at the same time, it just feels like extraordinary that it’s only now. And I think maybe the pandemic has maybe focused all of our minds in terms of the importance of going back to these very human, very loving principles. And as you said, a golden rule that if we can literally execute that in our daily lives, whether we’re work, play home, family, whatever. I just think the world would be a very different place if we actually practice that golden rule. And as you said, it’s, it’s over 2000 years old, so it’s certainly not new, but I love to see that coming through in the book.
48m 23s
2
Yeah. The book was written for my two new grant brand, new granddaughters, it’s life, life with wisdom for living a good life. And it’s disguised as a business book. But if you read with that in mind, it’s what, you know, life is so much influenced by the people you choose to spend your finite minutes on earth with, and, and invest in relationships with. And so that has implications for what companies you want to buy from, because you’re going to be interacting with those people and what companies you want to work for, the enormous influence on your life, what companies you want to invest in.
49m 4s
2
Yeah. And, and this the same, yes. The same golden rule philosophy plays throughout every one of those dimensions of life. And, and I try to, I write it in that personal, because yes, it’s about purpose-driven companies, but it is it’s, it’s my take on a purpose-driven life. Yeah. And the, the advantage of doing it at a corporate community is companies can help you measure your progress on the dimensions that count how many lives that you touch were enriched. How many people feel like you lived up to the golden rule, how many people would recommend you as a leader? These are things that if you care about living up to that standard, it corporate community is almost uniquely capable of offering those tools.
49m 55s
2
The apple is a great example. They, the employees out in the stores, they know of all the lives they touch, how many are enriched one, an amazing advantage that is if you actually care about getting better on that dementia.
50m 9s
1
Yeah. And I will definitely agree with exactly what you said in terms of the style of the book, Fred, because I actually read very few business books, but I did feel that this was super easy, really accessible. And I just wrote down some words that you talked about, actually, something about the concept of simplicity power. So I definitely felt that coming through in the style of what you’ve written. So, and certainly from my side, and it was super enjoyable to be able to read it in that way and obviously want to make sure that all of our listeners have a chance to it, to enjoy the book themselves. And, and I’ll make sure to link to that. So, first of all, I’m just going to recap, winning on purpose is the name of the book.
50m 50s
1
And it’s available now, as we’ve talked about on Amazon, on I presume anywhere that you can get your books and I don’t have any final, I suppose, questions on the book. Fred, I did want to check in on a health perspective because you do open the book in quite dramatic fashion with a, quite a serious health diagnosis. So you sound super healthy, but please tell us how are you doing?
51m 14s
2
I feel good. Thank you. But I, in a couple of weeks, I go in for my annual cancer scan and I’ll know more than, but I do, I I’m pleased to have had this time, but it’s been a little bit of a gift.
51m 29s
1
Sure. It certainly focuses the mind. Huh?
51m 32s
2
Ah, yeah.
51m 33s
1
Yeah. Brilliant. Well, listen, is there anything else Fred, that you wanted to talk about in terms of the book or any of these big ideas before we wrap up?
51m 42s
2
No we’ve covered. I think we’ve covered so many of the important ideas, but you know, if you want to lead a good life as a person, then you better figure out ways to be useful and love, love your partners and make their lives better. And that, that is the objective I had at vain. We figured out what drives team. Happiness is. One question will get you 80% of the insight is, do you feel like a valued member of a team that’s winning with its customers is the essence of it. You got to be a valued member of a winning team and you do gotta define winning as enriching the lives you touch.
52m 24s
2
And with that simple idea, then measure it and set your priorities that way. And you know, it, it’s not just a feel good thing. That’s actually what drives economic success. Yeah.
52m 38s
1
Wonderful. Well, listen, I think it’s a perfect note to wrap up. So Fred Reichheld creator of the net promoter system and author of winning on purpose. Thank you so much from let’s talk loyalty.
52m 49s
2
It’s been a pleasure.
52m 54s
1
This show is sponsored by “The Wise Marketer”, the world’s most popular source of loyalty marketing news, insights and research.
53m 4s
1
The Wise Marketer also offers loyalty marketing training, both online and in workshops around the world through its Loyalty Academy, which has already certified over 150 executives in 18 countries as Certified Loyalty Marketing Professionals. Thanks so much for listening to this episode of “Let’s Talk Loyalty”. If you’d like me to send you the latest show each week, simply sign up for the show newsletter on Let’s Talk Loyalty.com and I’ll send you the latest episode to your inbox every Thursday, or just head to your favorite podcast platform, find “Let’s Talk Loyalty” and subscribe. Now, of course I’d love your feedback and reviews and thanks again for supporting the show.
