The Ultimate Question: Driving Good Profits and True Growth (Hardcover)

by Fred Reichheld (Author) "Too many companies these days can't tell the difference between good profits and bad..." (more)
Key Phrases: bad profits, customer promoters, more promoters, Net Promoter Scores, American Express, Golden Rule (more...)

Editorial Reviews

From Publishers Weekly
Almost everyone appreciates the importance of customer satisfaction in business, but this book takes that idea to two extremes. First, it claims that customer satisfaction is more important than any business criterion except profits. Second, it argues that customer satisfaction is best measured by one simple question, "Would you recommend this business to a friend?" Pressure for financial performance tempts executives to seek "bad profits," that is, profits obtained at the expense of frustrating or disappointing customers. Such profits inflate short-term financial results, Reichheld writes, but kill longer-term growth. Only relentless focus on customer satisfaction can generate "good profits." One unambiguous question, with answers delivered promptly, can force organizational change, he claims. Reichheld makes a strong rhetorical case for his ideas, but is weaker on supporting evidence. The negative examples he gives are either well-known failures or generic entities like "monopolies," "cell phone service providers" and "cable companies." When presenting statistics on poor performers, the names are omitted "for obvious reasons." On the other hand, the positive examples are named, but described in unrealistically perfect terms. Believable comparisons of companies with both virtues and flaws would have been more instructive. (Mar.)
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Product Details

• Hardcover: 210 pages
• Publisher: Harvard Business School Press; 1 edition (March 2, 2006)
• Language: English
• ISBN-10: 1591397839
• ISBN-13: 978-1591397830
• Product Dimensions: 9.7 x 6.4 x 1 inches
• Shipping Weight: 1.1 pounds (View shipping rates and policies)
• Average Customer Review: 3.9 out of 5 stars See all reviews (69 customer reviews)
• Amazon.com Sales Rank: #14,064 in Books (See Bestsellers in Books)

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Most Helpful Customer Reviews

64 of 76 people found the following review helpful:

1.0 out of 5 stars Net Promoter is misleading and potentially dangerous, May 7, 2006

By	G. R. Merz "B School Prof" (Ypsilanti, MI USA) - See all my reviews (REAL NAME)

Frederick Reichheld's latest effort to enlighten CEOs and other business leaders is at its best mildly entertaining, but at its worst it is misleading and could result is some very costly and wrong decisions by potential users.

There are several critical weaknesses of this work-I will only mention a few.

First, there are many contradictions, reversals and logical inconsistencies throughout the book. Examples abound and can be discovered by anyone who spends a modicum of time with the book. Among the biggest is the reinterpretation of the satisfaction measure used by Enterprise Rental Car as a measure of net promoters (p.63). This is very confusing because earlier in the book the reader is led to believe that one needs to measure "recommendation" not "satisfaction" because Mr. Reichheld alleges that satisfaction is unrelated to revenue or profit growth. So why does the satisfaction measure works for Enterprise? More astounding Mr. Reichheld continually uses the Enterprise case throughout the book as justification for using the NPS measure.

Second, the entire premise of the Net Promoter approach is unsupported by third party peer-reviewed research articles in psychology, marketing research, or social science journals. All of the support provided in the book is based upon Mr. Reichheld's claims of research conducted by the firms he works with (Bain and Satmetrix) none of which has been reported in the aforementioned scientific publishing outlets. In fairness, the Net Promoter idea was originally promoted in a Harvard Business Review article, but HBR is not a research journal and its articles are not peer reviewed. Publication in HBR is somewhat equivalent to publication in Business Week or Fortune, and certainly does not qualify as scientific review.

Third, Mr. Reichheld confuses cause and effect with correlation. Recommendation is an effect not a cause. It occurs because something else (like a satisfactory experience) causes it to occur. Yet throughout the book, Mr. Reichheld continuously claims that recommendation's correlation with sales growth proves that it is a driver of growth. Correlation is simply a measure of association that says nothing about cause and effect. Consider the correlation between the number of churches in a community and beer sales. They are probably correlated but does one cause the other? More likely there is a third factor that is causing both to move together-like population growth. The same is true of the Net Promoter measure-it is likely being caused by something else-like satisfaction. Its correlation with sales growth is spurious and is not causal. If one examines the evidence provided by Mr. Reichheld in Appendix A this confusion of cause and effect is even more apparent-in every case shown, the time periods for the sales data predates the time periods when the Net Promoter Scores were collected. So what is causing what?

Fourth, the recommendation measure advocated by Mr. Reichheld is not a measure of "word-of-mouth" despite his claims to the contrary. Anyone who spends a nanosecond reading the question can see an obvious flaw in the interpretation of the measure. Reichheld's recommendation scale is basically a "unidirectional" scale-the scale is bounded by a positive (+) position (the "extremely likely" label) and a neutral (0) position (the "not at all" label) not a negative position. Nevertheless he interprets the scale as though it was actually measuring recommendation in a bi-directional manner by assuming that those who answer 0-6 are "detractors" who will spread negative "word-of-mouth" comments to others-but do they? Perhaps some of the respondents are detractors who answer at the lower end of the scale because there is nowhere else for them to answer, but it is also likely that some are truly advocates, just not extreme advocates. Mr. Reichheld claims this is a logical interpretation of what respondents mean-but is it true?

One final point concerns the claimed accuracy of the Net Promoter measure. In his classification of respondents Mr. Reichheld basically rescales an 11 point scale (0-10) into a three point scale (-1, 0, +1). By doing this the information content of the measure is reduced. The net effect of this, as any elementary statistics student can tell you, is that your confidence intervals are increased and your statistical power is reduced dramatically. This means that if the hapless reader of this book were to use the Net Promoter measure to assess the true value of their customer base they would be unable to detect any changes that would occur in an accurate way. For instance for a sample of about 750 customers, a user of the Net Promoter measure would be able to detect a %5 increase less than 10% of the time. A decision maker contemplating million dollar investments would do better by flipping a coin than relying upon a measure with these kinds of properties.

28 of 35 people found the following review helpful:

1.0 out of 5 stars very disappointing, April 20, 2006

By	Steve "Steve" (USA) - See all my reviews

I was very disappointed in Reichheld's book. While NPS is simple, it will also be of little value to organizations. Anyone that has ever taken a statistics class will laugh at his approach. Yes, it is simple number, for simple minds. Even his "data" to justify his premise is flawed. Look at page 192, Appendix A, figure A-1, comparing shipment growth of wintel computers from 1999 to 2002 to NPS score from 2001 to 2002. What an embarassment to researchers across the world. He is comparing two different time periods, and in fact, it implies that high growth drives net promoters, not the other way around.

From a statistical perspective his approach is flawed. His grouping of scores 0-6 as detractors (even though the question is how likely you are to recommend, not how likely you are to say negative things), 7-8 as neutral and 9-10 as promoters will introduce error rates that will go through the roof and cause false positive results at every turn. It lacks precision and reliability. I hope my CEO doesn't embrace it. If he does, I am selling my stock and looking for a new job!

10 of 11 people found the following review helpful:

4.0 out of 5 stars Don't sell to the stupid rich - make your customers happy so they sell for you , July 13, 2006

By	M. McDonald (Chicago, IL United States) - See all my reviews (TOP 1000 REVIEWER)    (REAL NAME)

The comic Steven Wright used to say, sell to the stupid rich because they have the money and they do not know how to copy your ideas. While that sage advice makes for good comedy its hard to measure and implement as strategy.

The Ultimate Question -- a follow-up to Reichheld's book on Customer Loyalty is a clear statement of a readily implementable concept for those looking to become more customer centric. The premise is simple, your company will grow if your customers are so satisfied that they will recommend your service to others. Now that is common sense, but what Reichheld has done is to create a definitive metric to measure and therefore help manage this source of organic growth.

The book is well structured and includes some detailed case discussions about companies that are using this concept to create growth in their core business. I call these case discussions rather than case studies because the cases focus more on what is working rather than the challenges of implementing these concepts.

One weak point about the book is that it works very hard to brand Net Promoter Score (NPS) and "The Ultimate Question." This gives the book a marketing flavor with repetition and some hype around these concepts and terms. In addition to this, the book is a soft infomercial for Bain Consulting and Satmetrix who are the companies involved in bringing this to market. This is unfortunate as it gives the ideas a glaze of marketing glitz. This is the primary reason why the book is not a 5 start recommendation.

Part 1: Why the ultimate question works?

The three chapters here discuss the challenges associated with generating growth in your core business and the difference between good and bad revenue. Good revenue is from customers who will use your services year after year, expand their relationship over time and recommend you to others. Bad revenue is from customers who view your as a transaction, something to be bought once and they will move on for a better deal.

The fact that good vs. bad is not an issue of market segmentation, but more a function of how you sell and serve customers is a big insight that many executives overlook.

Finally, the first part discusses the New Promoter Score and why it is a simple and powerful way to understand where you stand.

Part 2: How to measure responses?

This section starts with a discussion of how Enterprise Car Rental has used the NPS concept to drive their business. This is a good case that shows how NPS influences every part of the organization and its operation. The rest of the second part discusses how you address NPS from a measurement and execution standpoint.

Part 3: Becoming good enough to grow

This part puts the ideas behind NPS into action by discussing the strategic, organizational and client service initiatives for growth. Unfortunately this section falls a little flat in terms of providing insight and new ideas. The direction here is largely focused on doing traditional segmentation and service design, employee rewards and organization structures. The old adage of hire good people, align rewards, measure and manage are true but I was hoping for more.