Are You Referral Ready?

Customer loyalty expert Fred Reichheld uses what he calls the “net promoter score” to measure the difference between customers who promote or detract from company growth via word of mouth. The core of his work challenges companies to ask the customers one simple question: “Would you recommend us to a friend?” How much more profitable would your company be if your net promoter score was the highest in the industry?

Bad profit is earned at the expense of customer relationships, such as whenever a customer feels misled, when companies save money by delivering a lousy customer experience, or when salespeople push overpriced or inappropriate products. Bad profit does not show up as such on a balance sheet, but it has a dramatic negative effect on company growth.

Choose six random customers: a 1-month customer, a 3-month customer, a 6-month customer, a 9-month customer, a 1-year customer, and a more than 1-year customer. Offer an incentive for the customer to respond in writing (either online or via snail mail) to the question: “Would you recommend us to a friend?” Create a schedule for maintaining regular contact with current and future customers.

By making customer loyalty a priority, referrals and repeat sales and profit take care of themselves. When you have a mechanism for differentiating between and measuring good profit from bad, you are building a foundation for the kind of growth that the bottom line alone will not fully reveal.