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Loyalty Rules!Loyalty Rules!
Loyalty Rules!
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Excerpts
Author Interview
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The Loyalty Effect
Apply Loyalty to your Business
Loyalty Acid Test
Fred Reichheld: Author / Speaker
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Loyalty Rules!
Excerpts

Help Your Partners Win…

"On the high road, it is not enough that your competitors lose, your partners must win. So, pare away distractions, focus exclusively in businesses where you can be the best, and align partners around the overarching objective of upgrading the customer experience. Only the most unrelenting focus on customer value can sustain the economic and the ethical superiority of high-road strategies. Only the highest standards of excellence will create the conditions for trust, commitment, and mutual success."

Track Retention…
"You would be wise to track actual customer retention. The fact is that typical firms lose half their customers in fewer than five years - and customers don’t defect when they are really receiving superior value. With the advent of the Internet, customers’ shopping bots will compare real value with increasingly sophisticated algorithms, and price and service comparisons posted in real time on the Web will unmask value frauds. Word of mouse will spread the truth at lightning speed. The result will be skyrocketing defection rates for all firms but those offering truly superior value."

Know Where to Play…
"CEOs of top loyalty companies know precisely where they have the wherewithal to win and where they don’t. They don’t compete for every new business that seems profitable for the moment; they invest only where they see the potential for building sustainable assets and relationships. There is no room for me-too products and services; loyalty leadership is based on the kind of structural economic advantage that results only from focusing on positions of strategic superiority, positions that enable a firm to be the best and to drive toward market leadership."

Target the Right Customers…
"Loyalty leaders are extremely picky about targeting only the right customers -those for whom their firms have been engineered to deliver truly special value. While a few high-profile businesses are better off soliciting as many customers as possible - Microsoft’s Window’s operating system, for example - these are the exceptions, not the rule.

Attract Butterflies, not Barnacles…
"Unless you’re managing customer acquisition carefully, you’re probably letting the wrong ones in the door. Marketing and sales departments too often invest in lures to attract butterflies when they should be searching for barnacles. Barnacles are the customers who are likely to stick around for a lifetime if they are treated right. Butterflies, in contrast, are customers who tend to flit around to today’s sweetest deal, or to the company that happens to have the most dazzling new fad or the latest technology.

Since barnacles are hard to pry away from their current affiliations, the marketing job is much easier if the focus is on netting butterflies. If incentives for marketing and sales executives are based on volume of new customers, as is common, there will inevitably be a high yield of butterflies in the count."

Simplify Your Business…
"Great leaders know that the best business, like the best machine, is the one that is so reliable and so adaptable that it does the best possible job in the fastest and simplest way. So to be an effective leader you must resist the world’s inevitable drift toward complexity by simplifying your organization’s structure, systems for measuring progress, and rules for decision-making. You must pare away the distractions and focus on the relatively few principles and practices that make a vital difference in creating superior value. These are the loyalty principles and practices that define high road leadership."

Utilize Small Teams…
"Loyalty also comes naturally within a small team - or within a large organization that is composed of small teams. Thus many loyalty leaders utilize small teams as the molecular structure of their organizational design."

Measure the Right Thing…
"What you decide to measure clearly reflects your values and your priorities. To show your customers and partners that loyalty is at the top of your leadership agenda, make sure that your central metrics gauge the amount of value you are creating for all your customers and partners by measuring the health of key relationships and the level of loyalty you are earning."

Reward Wisely…
"Paying on profits alone is not wise because some employees will take shortcuts that boost current earnings but diminish assets needed to boost future year profits. Pure profit incentives need to be balanced with incentives to build long-term assets such as customer and employee loyalty."

Loyalty is Impossible without Trust…
"Encourage state-of-the-art communication and improve listening, learning and explaining skills enabling partners to reach the deeper levels of understanding that yield clearer priorities, coordinated actions, and superior results. Utilize the Internet to raise the quality of communication, not merely to crank up the volume. Nothing magnifies the loyalty effect like the trust engendered by open, honest, and direct exchange of information and ideas."

Educate Your Partners…
"Loyalty leaders want all their partners to understand the organization’s strategy, its core principles, its priorities, and even its problems. They want partners to know performance expectations and their individual standing so they can make wise decisions and trade-offs in their daily work."

Educate Your Employees…
" Without a clear view of company goals, full understanding of his or her own role, and reliable information about all that’s going on, no one can confidently gauge priorities or make the myriad daily decisions required to generate the loyalty effect.

Unless your employees understand your strategy and its economic rationale, they can’t be very effective in making it work. They won’t know how to respond to changes in the competitive environment, or in technology, or in customer needs. And they are unlikely to be as committed to its success."

Articulate Your Principles…
"You can neither practice nor preach effectively until you articulate your principles clearly. Write down your guiding principles and then preach them with passion. Only then can you and your network of partners truly understand what it means to be loyal. Only then can those principles become the gravitational center for organizational loyalty and provide a trustworthy guide for building true partnerships."

Harvard Business School Press 2001
Bain & Company  (c) Bain & Company, Inc.