The Ultimate Question 2.0 Summary - Fred Reichheld

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The Ultimate Question 2.0

The Ultimate Question 2.0 Summary
Career & Business

This microbook is a summary/original review based on the book: The Ultimate Question 2.0: How Net Promoter Companies Thrive in a Customer-Driven World

Available for: Read online, read in our mobile apps for iPhone/Android and send in PDF/EPUB/MOBI to Amazon Kindle.

ISBN: 978-1-4221-7335-0

Also available in audiobook

Summary

If one of your business associates placed a thick volume in your hands and called it “the single most significant business book” of the past decade, would you read it? Of course you would, especially after learning the enlightening effects on marketing industry leaders across the world through this critical piece of business literature. Even if you only have time to read a few pages per day, “The Ultimate Question 2.0” by Fred Reichheld (with Rob Markey) is sure to provide the intellectual breakthrough you need to engage your customers with an unmatched level of precision.

On its face, that may sound like a high billing for a book that was released back in 2011. But Reichheld’s work in this revised edition has allowed its content to remain fully relevant almost a decade after its publication. Within its nearly 425 pages, you’ll find insights into the difference between so-called “good profits” and “bad profits,” as well as innovative methods for spurring and measuring success through the Net Promoter System (NPS). Reichheld even provides input on how marketing leaders can plan for the future, as the customer-centric marketplace continues to diversify and adapt to new digital technologies.

An intro to “good profits” and the NPS

The first part of “The Ultimate Question 2.0” is focused on introducing the core concepts and terminology used throughout the entirety of the book. Specifically, in the preface, introduction, and in the first chapter, Reichheld begins to extrapolate on the idea of “good profits.” According to Reichheld, “good profits” are those economic incentives that derive from “delighting” customers and reaping the reward of their resulting loyalty. He asserts that these “good profits” can only be attained if a business takes the Golden Rule – treat others as you would want to be treated to heart - and implement it into their business operations, from top to bottom.

In these early sections, the author also introduces one of his core practical applications of “good profit” theory – the Net Promoter System or NPS for short. The NPS, as Reichheld describes, is focused on creating value by enriching the lives of customers and creating a stable profit structure, rather than exploiting customers for short-term gains. The system itself is open-source and flexible to the needs of specific industries, which is why companies like Chick-fil-A and Charles Schwab use modified versions of the NPS known as the “Raving Fan Index” and “Client Promotion Score,” respectively. Even massive international companies like General Electric and Philips use the NPS, in essence.

Reichheld details the NPS more in later chapters, but he summarizes its structural framework on a few key elements.  First, the NPS uses a systematic categorization of customers into “promoters,” “passives,” and “detractors” to score routine customer relationships. Next, it “closes loops” to learn from current successes and past mistakes, and, finally, the NPS makes the creation of more positive customer relationships a corporate imperative, thus allowing its mechanics to trickle down to every level of a business’s operations going forward.

The data bares out NPS’s success

This edition of “The Ultimate Question 2.0” includes several additions and revisions designed to back up the authors’ assertions that the NPS is the best means of attaining customer loyalty and economic success, in turn. To do this, Reichheld has infused a portion of the first chapter with data that acts as evidence to the NPS’s successes in the field. Among other case studies, Reichheld points to his own employer’s success in implementing the NPS. In particular, he indicates that Bain & Company determined that their own NPS derivative, the “Loyalty Effect”, could increase profits as much as 100% by increasing the customer retention rate by as much as 5%.

Reichheld also points to several other “stars” that have implemented an NPS-style system and reaped the appropriate rewards of increased customer loyalty and “good profit.” In particular, he says that Apple, Amazon, and Costco routinely return NPS scores as high as 80% (compared to an average firm or business, which only meets about a fourth of that score at 20%). 

Reichheld goes on to note that some companies (and entire industries) even possess negative NPS scores, which clearly illustrates why those companies are gaining more and more “detractors” from year to year. Survey results in this front are an interesting mixed bag, with categorical leaders often presenting vastly different NPS scores depending on the nature of their industry. Accordingly, the internet service leader Verizon clocked in a meager 13% while the grocery leader Trader Joe’s weighed in a massive 82%.

In summarizing his findings on NPS companies, Reichheld asserts his belief that high-achieving companies in this qualitative metric “typically enjoy both strong profits and healthy growth” compared to their competitors. Moreover, these high-achieving participants “tend to spend much less on marketing and new customer acquisition” by virtue of their ability to better retain their present customer base. In essence, current applications of the NPS system have not only been successful in general but also in terms of solidifying participant companies’ ability to grow sustainably and remain competitive within their own industry.

Attempting to measure customer loyalty

While the statistics referenced in the first chapter do strongly indicate potential productivity of an NPS-style system, Reichheld quickly acknowledges that those numbers mean little if the reader (and their associated business ventures) are unable to measure their own successes on the customer loyalty front. Accordingly, the following chapter  focuses on the challenges associated with measuring (among other factors) customer satisfaction in a modern economy where proprietors of goods and services and their customers may be separated by a digital sea in many cases.

First and foremost, Reichheld points to the fact that “surveys,” as they are currently used in the customer satisfaction analysis field, are prone to numerous pitfalls. Among other issues, they found that the sheer number of questions presented in many surveys represented their own barrier to gaining reliable feedback. In time though, Reichheld’s team discovered that just one question was able to encapsulate nearly all of their efforts toward gauging customer loyalty. Which one? The so-called ultimate question – “How likely is it that you would recommend Company X to a friend or colleague?”

Finally, in an out-of-10 scoring system, respondents who gave the example company a 9 or 10 were labeled “promoters,” because they represented 80% of all referrals.  Respondents who gave middle grounded scores, 6 or 7, were labeled “passives,” because there was around a fifty-fifty chance that they would initiate a referral. All respondents who gave a score below 6 were lumped together as “detractors,” with data correlation indicating that 80% of negative word-of-mouth comments about the surveyed company comes from this subset. Going forward, Reichheld believes that these categorizations can be generally applied to predict future customer behavior, making marketing efforts more streamlined in turn.

The fourth chapter provides a vivid illustration of all of these efforts in practice, as shown through the implementation of customer loyalty assessments by Enterprise Rent-a-Car. Meanwhile, the following chapter sets out further “rules for measurement” that can serve as guidelines for individuals or companies looking to establish an NPS-style system of their own.

Weaving the NPS into a business

Reichheld also readily recognizes that weaving an NPS-system into a new or existing business is challenging in its own right, not least because of the immense temptation put forth by “bad profit” measures. In the sixth chapter, though, the author attempts to propose a reliable 3-step plan for implementing the Golden Rule throughout an organization or business. 

First, Reichheld believes that a company’s executive leadership (especially the CEO) must embrace the NPS’s focus on customer loyalty as a “mission-critical priority.” These company leaders must personally understand that customer loyalty provides not only an economic incentive but also an “inspirational and moral imperative” that can help the company live up to its core values more effectively. The seventh chapter discusses this concept at a greater.

Second, Reichheld also believes that companies that have previously succeeded with NPS were able to do so because its core mechanics were interwoven into the company’s decision-making processes. As a result, these companies operated on a daily and monthly basis to grow customer loyalty by learning from past experiences in the same domain.

Third, and finally, companies that have succeeded under NPS used it as a long-term “journey of cultural change and growth,” rather than a short-term program. NPS-style systems take time to grow and bear fruit, so participants must be willing to play the long game to reap its rewards. 

Also, most of the sixth  is devoted to providing case studies that Reichheld used to determine what methodologies support “success” in an NPS-style system. Among others, Reichheld’s analysis of Apple’s retail efforts and Ascension Health’s nonprofit strategy really demonstrate how NPS can be used in almost any industry.

Closing the loop, all the way up

The eighth chapter focuses primarily on the need to “close the loop” if you want your company to succeed with an NPS-style system. This is essential because heuristic qualities of the Golden Rule cannot reach their full potential unless every level of a company is operating in tandem.

These efforts should always start on the front line, according to Reichheld, because the “customer” (and their loyalty) in the customer-centric model represents the be-all, end-all of goals. To close the loop on the front line, companies must carefully monitor customer experiences and follow up when a customer provides sub-par feedback. Then, qualitative and quantitative data from this feedback should be pooled and shared with all appropriate staff members regularly.

After leaping  up to the mid-level management and development level, Reichheld asserts that closing the loop should focus on creating products and services that attract and retain customers. While this effort in practice will vary from industry to industry, it should keep the lessons learned on the front line firmly in mind.

Finally, at the senior executive level, companies using an NPS-style system must set up leadership teams that can implement NPS as a strategic imperative. This includes remaining responsive to customer concerns on the front line at all times.

The NPS for the journey ahead

In the following chapters, 9 and 10, Reichheld provides readers with further insights that can service their NPS-related needs in the future. At this point, Reichheld throws in a few more “keys to success” that – he believes –  were amplified by all of the previous successful NPS participants. These include:

  • Assign the right leaders and position them for success.
  • Pull the organization together.
  • Reorganize around the customer.
  • Hire and fire the right people.
  • Be careful about linking NPS to compensation.
  • Don’t skimp on support from the information technology department.
  • Never give up.

Reichheld expounds further on each of these guide points in the ninth chapter, thus providing prospective users in unique industries to envision their future implementation of an NPS-style system. Meanwhile, the next chapter acts as a sort of reflection point for the book’s authors, as they look back and try to predict what the business cultural changes during the period between the first and second editions of the book indicate for the immediate future. They even take some time to address noteworthy criticism against their methods while succinctly addressing the underlying risks that come with NPS.

Final Notes

All in all, “The Ultimate Question 2.0” provides a detailed guide to understanding NPS systems at a conceptual level before working the mechanics of the system into your own company’s business operations. With tons of case studies from real NPS practitioners, readers can attain a realistic appraisal of what to expect as their NPS system evolves their company culture. Co-authors Fred Reichheld and Rob Markey have really gone out of their way in this revised edition to create a definitive tome that deserves a place on every self-respecting business leader’s reading list.

12min Tip

Not many businesses have implemented the NPS system, and perhaps you should be the one spearheading this transition in your company.

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Who wrote the book?

Rob Markey (1964) is best known for his expertise on customer experience and marketing loyalty on which topics he, as a business strategist, author and “Harvard Business Review” contributo... (Read more)

Fred Reichheld (1954) is a business consultant, bestselling author and co-founder of the NPS tool of management. Considered by many, as one of the leading consultants in the b... (Read more)