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The Loyalty Effect: The Hidden Force Behind Growth, Profits, and Lasting Value Hardcover – 1996

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Editorial Reviews

From Publishers Weekly

Reichheld, a director of Bain & Co., a strategy consulting firm in Boston, takes an old-fashioned concept?loyalty?and shows its relevance to customer retention and long-term profit growth. His position seems obvious, but its import has been lost amid the rapid turnover in the current business climate. He notes that major companies replace half their customers in five years, half their employees in four and a half and their investors in less than one. To counteract this trend, he recommends loyalty-based management, in which businesses not only make a conscious effort to retain customers but also develop strategies for attracting the kind who are likely to remain loyal. Reichheld also posits a "cause-and-effect relationship" between employee and customer loyalty. Writing with Teal, a senior editor at Bain & Co., he makes his point with examples from State Farm, Toyota/Lexus and others that have improved their bottom lines and insured long-term growth by developing loyalty. Illustrations. 50,000 first printing; $80,000 ad/promo; author tour.
Copyright 1996 Reed Business Information, Inc.

From Booklist

Much has been written recently lamenting the loss of loyalty in all aspects of society. This loss seems magnified in the corporate world, where job change is often the only ticket for getting ahead and where companies regularly abandon communities and downsize longtime workers out of jobs. In White-Collar Blues, Charles Heckscher last year surveyed the state of middle-management loyalty and offered solutions for rebuilding loyalties. Now Reichheld, director at a strategy consulting firm with its own "loyalty practice," analyzes not only employee but also customer and investor loyalty and demonstrates the measurable results that strong loyalties have on corporate profits. Reichheld notes that traditional accounting systems do not show the "loyalty effect" and offers gauges that do. To make his case, he uses such companies as Lexus, John Deere, and Leo Burnett--the "loyalty royalty" --as examples. David Rouse

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Product Details

  • Hardcover: 323 pages
  • Publisher: Harvard Business School Press (1996)
  • Language: English
  • ISBN-10: 0875844480
  • ISBN-13: 978-0875844480
  • Product Dimensions: 9.4 x 6.6 x 1.2 inches
  • Shipping Weight: 1.6 pounds
  • Average Customer Review: 4.7 out of 5 stars  See all reviews (44 customer reviews)
  • Amazon Best Sellers Rank: #323,735 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 to find more key insights and videos on driving this growth.

Customer Reviews

Most Helpful Customer Reviews

27 of 27 people found the following review helpful By Robert Morris HALL OF FAMETOP 500 REVIEWERVINE VOICE on June 26, 2001
Format: Hardcover
I read this book when it was first published and recently re-read it. Those who have checked out my reviews of other books which address many of the same issues already know that I have a bias with regard to "customer satisfaction" and "customer loyalty", agreeing with Jeffrey Gitomer and others that the former is wholly dependent on each transaction and the latter can end (sometimes permanently) because of a single unsatisfactory transaction. The objective for those who have customers (be they internal or external) is to achieve and then sustain their passion about doing business with you. You want them to become evangelists.
Of course, Reichheld fully understands all this. In a brilliant essay which recently appeared in the Harvard Business Review, he shares new research which (again) shows 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 (David Maister has much of value to say about this in his most recently published book, Practice What You Preach), play to win-win, be picky, keep it simple, reward the right results, and finally, listen straight. In this book, 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. He draws upon a wealth of real-world experience which he and his associates in Bain & Company, a worldwide strategy consulting firm. Reichheld heads up its Loyalty Practice.
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16 of 16 people found the following review helpful By Ray Campbell on July 9, 1999
Format: Hardcover
Reichheld lays out both why loyalty matters, and why difficulty in measuring the impact of loyalty has made managers undervalue it in the past. He shows how loyal relationships with employees, suppliers, customers and investors all contribute to a company's long term success.
His insights are profound for anyone building a company. We have used his insights to build our business, and have benefited enormously from the viewpoints expressed in this book.
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11 of 12 people found the following review helpful By Jerome Jewell on November 25, 1998
Format: Hardcover
The Loyalty Effect takes a long, detailed look at the economics of loyalty, providing concrete examples to support the conclusion that the goal of a business must be the creation of sustainable value for customers employees and investors.
Reichheld takes that which many of us hold as "intuitively correct" and adds substance to our intuition. By translating loyalty into the language of accounting and finance, for example, he proves over and over again, that loyalty is a pre-requisitie for proitability. He doesn't argue against profitability...he merely clarifies the order of priorities for management.
I'm a former IBMer and I now run my own management consulting firm. Reichheld's firm is in fact a competitor, and yet I strongly recommend this book to any decision-maker who is interested in breaking through the fluff and securing real-world advice regarding specifc ways to sustain the health of any company.
Rather than reading the "visionaries", the turnaround specialists and the various and assorted geniuses read this. Reichheld, offers a straightforward summary of empirical evidence that correlates high retention rates (of customers and employees) with long-term profitability. While many other authors seem to be pushing their own agendas (and egos), Reichheld is summarizing the collective experience of numerous companies around the world.
Read this book. It will guide you to better business performance whether you're in marketing, finance, engineering, operations, HR or window-cleaning. If you're tired of losing customers and employees, this book may help save your butt! (if you're patient and willing to ask some difficult questions).
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9 of 10 people found the following review helpful By Donald Mitchell HALL OF FAMETOP 1000 REVIEWERVINE VOICE on January 28, 1999
Format: Hardcover
This is an outstanding book for explaining and exploring the economic value of keeping a customer. In explaining those benefits, it becomes clearer how important and affordable it is to keep customers. Unlike most business books, which seem to be written by people who cannot use numbers, this one quantifies its points. It also shows you how to do the same for your business. As such, it is a very practical and important resource for every company. I strongly urge you to read and apply these lessons to your business. In many companies, getting new customers is seen as the solution to virtually every problem. However, a lot of times companies have to get new customers because they have disappointed the old ones. You are better off to find out why you are losing customers, and do something about it. Otherwise, you will just spend a fortune to add new customers who will soon leave you for the same reasons. This book also explains a well-known investing phenomenon, that companies with high loyalty rates are great stocks to own (like Coca-Cola, Gillette, and so forth). Did Warren Buffett know this all along? I should mention that I am a management consultant, but have no connection to the firm that wrote this book.
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