Fred admitted that he usually talks about profitable growth. But today, instead of discussing GROWTH, he discussed COSTS. That's what people are focused on today because of the economy.
How does loyalty save companies money? Here are just a few of the ways that Fred mentioned:
- Lower acquisition costs
- Fewer problems and complaints
- Longer tenure, which spreads fixed costs over a longer customer lifetime
- Lower risk of lawsuits
- Less need to spend on PR
- Employees get treated better, which reduces turnover
In my conference opening, I had pointed out that the hotel site sits adjacent to the London Wall, built in the 2nd century AD by the Romans. Fred pointed out that the concepts behind Net Promoter connect back to concepts from thousands of years before that...the idea that your reputation is the most valuable thing, as noted in Proverbs 22:1.
"A good name is more desirable than great riches. To be highly respected is better than having silver or gold."
As Fred put it, "How many people get turned into Promoters is essentially the same as Proverbs 22:1." And this connects directly to the economics of your business...including cost efficiency. As consumers we are looking for good value for the money...and that requires companies to be operating efficiently.
When you consider where to cut costs, look at the economics of detractors. They often are costing your company money. In one example he shared from work done by Bain & Company, it showed that detractors' lifetime costs can be 140% of lifetime revenues for the same group of customers.
What about employee costs?
Fred points out that in the accounting view of the world, employee salaries are a liability. So companies think of laying employees off when they need to cut costs. But it's not that simple. Employees are also the key source of value in your business. Keeping the right employees on board is just as critical as focusing on the right customers to drive efficiency and value in your business.
Fred discussed a new case study, from a company who spoke last year at our Net Promoter Conference, Travel Counsellors. This UK based travel agency, with work-from-home agents, has been defying gravity in a highly competitive industry by focusing its entire ecosystem on generating promoters. Top agents get consistently rewarded for generating promoters, and the top agent each year wins a new BMW!
As Fred told the story, I remembered my first phone discussion with the head of sales from Travel Counsellors (who I subsequently introduced to Fred). They told me the BMW story, and said that their NPS was in the 90%+ range. My first reaction was, "Are your agents gaming the system to win the car?" But as I talked to them more about the things they do to educate and motivate their agents to deliver exceptional customer experiences, I realized this was the real deal. And their revenue growth trajectory that Fred showed today proves the point. The company has grown steadily, and has gone from a startup 10-15 years ago to a business of over $280 million in 2009.
Fred also told the story of Apple Retail. By being creative with the experiences they offer in their retail stores (such as the Genius Bar), Apple has achieved annual sales per square foot of over $4000, compared to companies like Circuit City (which Richard Owen mentioned went bankrupt last fall), whose sales per square foot were closer to $550.
Fred's parting thought for the audience: You have 10 million minutes in your life. How will you measure your success? For your company, think about it as the number of Promoters you create, and your reputation will be your legacy.
