Loyalty Rules: How Today's Leaders Build Lasting Relationships [Paperback]

Frederick F. Reichheld (Author), Rob Markey (Author)

Book Description

Publication Date: July 3, 2003

"Reichheld outlines a strong argument for companies to develop policies that foster loyalty among customers and employers." - "Financial Times". In this provocative yet practical book, Fred Reichheld argues that loyalty provides the acid test for leadership in today's volatile business environment, and that most leaders deserve failing grades. Reichheld's 1996 international bestseller, "The Loyalty Effect", set out his theory and convincingly established the link between loyalty and bottom-line profits. In "Loyalty Rules", he moves from theory to practice, using vivid stories from many of today's most successful companies to illustrate how superior leaders create networks of mutually beneficial, trust-inspiring partnerships between customers, employees, suppliers, and investors.

Editorial Reviews

Amazon.com Review

It's trendy these days to decry a lack of loyalty among employers, employees, customers, and even investors, and blame it for everything from drops in business profitability to the decline of civilized society. But Frederick F. Reichheld, a Bain & Company director emeritus, insists that loyalty lives--and, in fact, remains a major reason for the success enjoyed by some of the leading names in both the Old and New Economies. Loyalty Rules, his follow-up to 1996's The Loyalty Effect, shows how practices that built such relationships in organizations like Harley-Davidson, Enterprise Rent-a-Car, Cisco Systems, and the U.S. Marine Corps help improve the atmosphere for all concerned and aid in producing better bottom-line results. The bulk of the book focuses on specific, real-world applications of Reichheld's Six Principles of Loyalty: in "Preach What You Practice," for example, he outlines various ways that "loyalty leaders" can articulate relevant concepts while clarifying "how these same philosophical foundations are ... not just feel-good platitudes." Reichheld also includes sample questionnaires from his Acid Test Survey, a critical part of the prescribed diagnosis-and-remedy program that is freely available on the author's Web site. --Howard Rothman --This text refers to the Hardcover edition.

From Publishers Weekly

Reichheld (The Loyalty Effect), director emeritus of Bain & Company, believes that companies today over-emphasize short-term profits at the expense of employees and customers. Reichheld offers six loyalty principles (employed by top-shelf companies such as Enterprise-Rent-a-Car and Dell Computer), including: "reward the right results"; "listen hard and talk straight"; "preach what you practice." Company profiles with comments from executives are particularly useful, though some examples have already been studied extensively (Southwest, Cisco). Nonetheless, the book makes a solid contribution.

Copyright 2001 Cahners Business Information, Inc.

--This text refers to the Hardcover edition.

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Product Details

• Paperback: 240 pages
• Publisher: Harvard Business Review Press; 1 edition (July 3, 2003)
• Language: English
• ISBN-10: 1591393248
• ISBN-13: 978-1591393245
• Product Dimensions: 9.2 x 6.2 x 0.6 inches
• Shipping Weight: 10.4 ounces (View shipping rates and policies)
• Average Customer Review: 4.1 out of 5 stars  See all reviews (13 customer reviews)
• Amazon Best Sellers Rank: #280,159 in Books (See Top 100 in Books)

More About the Author

Fred Reichheld is a Bain Fellow and founder of Bain & Company's Loyalty Practice, which helps companies achieve results through customer and employee loyalty. He is the creator of the Net Promoter® system of management.

His work in the area of customer and employee retention has quantified the link between loyalty and profits. Fred's books, The Loyalty Effect: The Hidden Force Behind Growth, Profits, and Lasting Value (HBSP 1996); Loyalty Rules! How Today's Leaders Build Lasting Relationships (HBSP 2001), and The Ultimate Question: Driving Good Profits and True Growth (HBSP, 2006) have each become best sellers.

In his latest book, The Ultimate Question 2.0: How Net Promoter Companies Thrive in a Customer Driven World (HBR Press-Sept. 2011), Fred reveals how NPS practitioners have utilized the Net Promoter System (NPS) to generate extraordinary results. Visit www.netpromotersystem.com to find more key insights and videos on driving this growth.

Customer Reviews

Most Helpful Customer Reviews

21 of 22 people found the following review helpful:

5.0 out of 5 stars Build Loyalty with Integrity Among Customers and Employees, August 22, 2001

By 

Donald Mitchell "Jesus Loves You!" (Thanks for Providing My Reviews over 110,000 Helpful Votes Globally) - See all my reviews
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This review is from: Loyalty Rules! How Leaders Build Lasting Relationships (Hardcover)

Most sequels to business books merely add some more detail to the argument of the previous book. Loyalty Rules! is a happy exception to that circumstance. The Loyalty Effect is a fine and helpful book, but I prefer Loyalty Rules! because it is more practical and explores so many more dimensions of leadership and management. There is also new information in Loyalty Rules! about the economics of customer loyalty for doing business on the Internet.

Many people take the financial incentive to keep customers longer as encouragement to employ all of the latest loyalty-building tools (from data-mining to loyalty incentive programs). Mr. Reichheld is correct that encouraging people to be loyal while treating them with bad service, poor products, or disloyalty in return will not work. He argues instead for a values-based orientation that will remind many people of the principles in The 7 Habits of Highly Effective People.

The essence of the concept for creating loyalty is: "Show your partners [stakeholders like customers and employees] that loyalty is a logical strategy for the pursuit of self-interest when self-interest is defined in the context of lifelong success."

His six principles for building loyalty are paraphrased as follows:

(1) Always play to provide wins for the stakeholder as well as for the company.

(2) Be selective about the employees and customers you take on and encourage to stay with you, so that they enhance your cooperative system.

(3) Keep your approach to being loyal (and earning loyalty in return) simple. For example, "Do right by the customer" was an actionable motto for Intuit when bugs cropped up in its tax software.

(4) Reward providing the right results (which usually means adjusting the way your compensate and motivate people in your organization).

(5) Listen, learn, act, and explain (communication is a two-way street if you are to improve and be reponsive).

(6) Begin with how you want to be remembered when you decide what to say and do today, and then preach with your words and actions to support that end.

The book has fairly well developed examples from Enterprise Rent-A-Car, Vanguard Group, Harley-Davidson, Cisco Systems, Dell, Northwestern Mutual, MBNA, Chick-Fil-A, USAA, the New York Times, the U.S. Marines, and Intuit. There are also references to companies like ServiceMaster, Southwest Airlines, SAS (the computer software company) and other service organizations. The book and the book's web site contain loyalty questionnaires you can use to diagnose how your organization is doing. At the end of chapters 3-8 are directions for how to use the answers you get to direct your next steps.

One big surprise in the book is that it emphasizes the dual idea of having an economic advantage and then using some of the economic benefits of that advantage over competitors to provide better results in ways that will build loyalty. The concept is that you turn a temporary economic advantage into a permanent one by building loyalty. You are directed to another Bain book, Profit from the Core, as the source for how to achieve that initial economic advantage by focusing on your core strength.

Clearly, some of the examples seemed to have as much to do with superior economic advantage (partly helped by employee loyalty) as they did with building customer loyalty. That was especially true of Dell, Cisco, Southwest Airlines, and Enterprise Rent-A-Car. I was left with the question of what to do if your economic advantage erodes faster than you can building an economic advantage from loyalty.

The book suggests that all of this applies to other stakeholders like vendors, partners, lenders, shareholders, the communities you serve, and so forth. Only vendors show up in any specific discussions. It looked to me like much of the advice would work better for a private company or governmental operation (as some of these are) than for a public company with "what have you done for me lately?" institutional shareholders.

Curiously, many companies with very high loyalty but less than perfect ethics don't make it as major cases in the book. What should we conclude about Microsoft, Coca-Cola, MTV, cable television service providers, tobacco companies, and illegal drug dealers? They certainly make outsized profits due to their high customer loyalty. I couldn't tell if Mr. Reichheld is arguing that their success is unsustainable, or socially undesirable.

After you finish enjoying this book, ask yourself what an employer or product/service provider needs to do in order to earn your loyalty. Where do you see positive models of good behavior and assistance that inspire you to reciprocate by providing your loyal support? What lessons do you draw from those experiences which should be applied to your business, consumption, and personal life?

Always start with the question, "What can I do to help you?"

4 of 4 people found the following review helpful:

4.0 out of 5 stars THE HIDDEN BENEFITS OF LOYALTY, January 13, 2004

By 

Denis Benchimol Minev "Amazonia" (Manaus, Amazonas, Brazil) - See all my reviews
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This review is from: Loyalty Rules! How Leaders Build Lasting Relationships (Hardcover)

Reichfeld's thesis is that loyalty, more than a fosuc on profits, is what guarantees companies long term success. He uses a handful of examples, including Enterprise Rent-a-Car, Northwestern Mutual, Harley Davidson, Cisco, among others, to make the case that having outstanding loyalty from your customers, suppliers and employees drives outstanding results.

The main rules Reichfeld sticks to and calls the "high road" are the following:
1. Focus on win/win solutions with partners
2. Focus only on clients which you can serve well
3. Focus on simplicity to allow everyone to understand the rules
4. Develop a set of principles and live by them, rewarding others who act according to those principles.

Overall, he makes a strong case to show how these principles can have a positive effect on business. By having low turnover, a fast food restaurant spends very little on HR expenses. By focusing on the bikes their customers love (and not diversifying), Harley gains lifelong customers.

The weakenesses of the book lie in the overemphasis of loyalty, in relation to other important tasks in business. Of course, being a book on loyalty, one could not expect anything different. Additionally, it would have eben useful to have some fake types of loyalty as example of weak attempts at loyalty. I am sure certain companies must have tried to gain loyalty through not-so-smart measures, so it would be nice to haev examples in order to differentiate them.

Overall, it is a very interesting book, useful to anyone involved in customer related businesses and in managing employee relationships. It is short (a benefit) and a bit too concise (a drawback), so it should not take more than a week to read for a regular reader.

4 of 4 people found the following review helpful:

5.0 out of 5 stars Timeless Principles: More Relevant Today Than Ever Before, January 12, 2004

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Robert Morris (Dallas, Texas) - See all my reviews
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This review is from: Loyalty Rules: How Today's Leaders Build Lasting Relationships (Paperback)

A recent re-reading confirms my initial reactions to this book. In a brilliant essay which appeared in the Harvard Business Review, Reichheld shares research which suggests that companies with faithful employees, customers, and investors (i.e. capital sources which include banks) share one key attribute: leaders who stick with six "bedrock principles": preach what you practice, play to win-win, be picky, keep it simple, reward the right results, and finally, listen hard...talk straight. In The Loyalty Effect, Reichheld organizes his material within 11 chapters which range from "Loyalty and Value" to "Getting Started: The Path Toward Zero Defections." With meticulous care, he explains how to devise and them implement programs which will help any organization to earn the loyalty of everyone involved in the enterprise. Reichheld draws upon a wealth of real-world experience which he and his associates have accumulated at Bain & Company, a worldwide strategy consulting firm. Reichheld heads up its Loyalty Practice.

In his most recently published book, Practice What You Preach, David Maister explains why there must be no discrepancy whatsoever between the "talk" we talk and the "walk" we walk. Reichheld agrees, noting that the "key" to the success of his own organization "has been its loyalty to two principles: first, that our primary mission is to create value for our clients, and second, that our most precious asset is the employees dedicated to making productive contributions to client value creation. Whenever we've been perfectly centered on these two principles, our business has prospered." It is no coincidence that the world's most highly admired companies are also the most profitable within their respective industries. I wholly agree with Reichheld that loyalty is critically important as a measure of value creation and as a source of profit but that it is by no means "a cure-all or a magic bullet." Loyalty is based on trust and respect. It must be earned, usually over an extended period of time and yet can be lost or compromised at any time with a single betrayal.

In Loyalty Rules!, Reichheld develops these and other ideas (the foundation of what he calls an "economic framework") in much greater depth as he explains how today's leaders build lasting relationships beyond as well as within their organizations. "Loyalty cannot begin with tools; it must begin with leaders who recognize the enormous value of building and maintaining mutually beneficial relationships....Accordingly, this book spends at least as much time on the underlying objectives for building loyalty as it does on the how-to's." He organizes his material within eight chapters which range from "Timeless Principles" (previously introduced in The Loyalty Effect) to "Preach What You Practice" in which he asserts that actions speak louder than words and together, they are "unbeatable." One of this book's greatest benefits is provided in a series of "Action Checklists" which reiterate key ideas while suggesting specific initiatives to implement them effectively. The book concludes with an appendix, "The Loyalty Acid Test," which consists of separate surveys of consumers and employees. Obviously, each reader must modify either survey to ensure that it is appropriate to her or his own organization's specific needs and objectives. However, all modifications should be consistent with the 'timeless principles" which Reichheld examines in the first chapter. I highly recommend this book, presuming to suggest that, if possible, The Loyalty Effect be read first.