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 hard...talk 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. In his most recently published book, Practice What You Preach, David Maister explains why there must be no discrepancy whatsoever between the "talk" we talk and the "walk" we walk. Reichheld agrees, noting that the "key" to the success of his own organization "has been its loyalty to two principles: first, that our primary mission is to create value for our clients, and second, that our most precious asset is the employees dedicated to making productive contributions to client value creation. Whenever we've been perfectly centered on these two principles, our business has prospered." It is no coincidence that the world's most highly admired companies are also the most profitable within their respective industries. I wholly agree with Reichheld that loyalty is critically important as a measure of value creation and as a source of profit but that it is by no means "a cure-all or a magic bullet." Loyalty is based on trust and respect. It must be earned, usually over an extended period of time and yet can be lost or compromised at any time with a single betrayal.

Here are three brief excerpts:

"One common barrier to better loyalty and higher productivity is the fact that a lot of business executives, and virtually all accounting departments, treat income and outlays as if they occurred in separate worlds. The truth is, revenues and costs are inextricably linked, and decisions that focus on one or the other -- as opposed to both -- often misfire."

"Companies cannot succeed or grow unless they can serve their customers with a better value proposition that the competition. Measuring customer and employee loyalty can accurately gauge the weaknesses in a company's value proposition and help to prescribe a cure."

"While every loyalty leader's strategy is unique, all of them build on the following eight elements: Building a superior customer value proposition, finding the right customers, earning customer loyalty, finding the right employees, earning employee loyalty, gaining cost advantage through superior productivity, finding the right [capital sources], and earning [their] loyalty."

Who will derive the greatest value from this book? Decision-makers in any organization (regardless of size or nature) which has been weakened by defections among customers and/or employees. If the primary objectives are value creation and partnership, decision-makers in these organizations must never betray or neglect any of the fundamentals of loyalty-based management: "partnership builds incentive; incentive builds value; value builds loyalty; loyalty builds even greater value." It's as simple and (yes) as difficult as that.

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.

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).

Peter Pick
(...)

1. Build Superior Customer Value 2. Find the Right Customers 3. Earn Customer Loyalty 4. Find/Keep the Right Employees 5. Reward Loyalty Performance (Loyalty-Based Compensation) 6. Build Mutually Beneficial Relationships

One awareness that comes to life in the reading of this book is the idea that companies should target their customers with as much care as they choose their employees. Targeting the right customers will help you best serve those customers, reduce marketing expenditure, and ensure wallet share. All customers are not equal. Loyal customers are more profitable when you look at the big picture. For instance, when you look at the acquisition cost, base profit, revenue growth, potential for referrals, and price premium it is easy to see that a customer that has been with you longer is a better return on your investment in acquiring that customer. Especially because some industries don't even break even until a customer has been with the organization from between three to seven years. This same equation can be applied with loyal employees. There is so much information in this book that it is difficult to determine the most significant key points. What surfaces as the key takeaway is that Reichheld asserts that building loyalty is not "a nice thing to do"-it is a business necessity. Loyalty Leaders are setting new records in productivity and surpassing financial goals and objectives. Many perceive the "loyalty effect" to be a good idea, but somewhat "non-tangible." There is an entire chapter call The Economics of Customer Loyalty where Reichheld actually demonstrates how organizations can capture, quantify, and measure the impact of loyalty. This is not "soft skill"-it is a business imperative.

Although my current interest is largely the subject of customer relationships, Mr. Reichheld reminds me of the importance of integration. Loyalty initiatives must be integrated! Customer loyalty cannot be achieved without a corresponding commitment to employee and shareholder loyalty. This idea is very important.

The book is extremely well-written and compelling enough to warrant a significant time investment. By focusing case examples on a handful of "loyalty leaders" such as MBNA and State Farm, readers get a very complete picture of best practice.

Readers looking to develop an economic case for loyalty initiatives will benefit particularly by reading Chapter 2, on the economics of customer loyalty, and Chapter 10, on measurement.

[Dan Michaluk is a simulation designer for ExperiencePoint, creators of award-winning business simulations.]

The second half of the book explains (in excruciating detail) how to set up measurement and incentive systems based on this loyalty-based framework. Unfortunately, the author only gives passing mention (in Ch. 10) to the fact that these systems are not applicable to many businesses, including technology firms and makers of commodity products. As an IT analyst in a paper company, I got little tangible benefit from Reichheld's discussions.

Lo bueno si breve, dos veces bueno. Es esta una de las citas que se pueden extraer de tan buen libro de consejos y ejemplo del barroco en la literatura. Frases cargadas de giros del lenguaje, acompañadas de sabiduría por un hombre muy sagaz para aconsejar en materia de ser prudentes en la vida cotidiana. Este pequeño volumen, puede usarse como uno de esos libros de cabecera en el cual se leen párrafos todos los días. Conceptista por excelencia, Gracián nos ilumina grandemente en una época en la cual el ingenio parece relegado por el exceso de información a la que tenemos que hacer frente. A veces en nuestro afán de poseer conocimientos y estar enterados de la ultima cosa que pasa, no cultivamos el ingenio, sin saber que eso nos ayudara en muchos casos. Por ejemplo el ingenio nos puede ayudar allí donde la avalancha de conocimientos inútiles se queda corta. Podemos considerar el ingenio como la habilidad de manejarnos con los datos que tenemos para sacar partido de situaciones inesperadas. También podría ser la forma ingeniosa en que encontramos soluciones insólitas para cosas cotidianas, que las personas bien informadas, pero sin ingenio ven como avasalladoras. En definitiva una buena lectura para aquellos que deseen cultivar su ingenio.

Luis Méndez.

If you went to a Jesuit school you can really appreciate this gem.

I try to read from it everyday. It's that great.