There is an additional problem with the Reichheld thesis which has to be recognized. Everyone that I know in our business assumes that the increase has to come from treating the customers better in some way. You build relationships with them. You send them letters, birthday cards and newsletters.
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Edwards Deming, the Einstein of quality and business success, the true role of enlightened management is Prediction.
The Loyalty Effect is about a new management method — and new measurement tools — that allows you to predict with superior accuracy the future growth and profits of any company. LBM is not some vague, futuristic theory about the increasing importance of intellectual capital. Applicable to individuals and organizations alike, LBM offers a breakthrough system for profit growth.
Profit is indispensable, of course; nevertheless, profit is always a consequence of value creation. There are three types of Loyalty: Customer, Employee and Investor.
All three are inextricably linked. Contrary to what many have been taught, improving satisfaction levels does not keep customers loyal or improve profits. This is a vital point to remember. Loyalty leaders engineer all of their business systems to keep their employees permanent, by valuing them as true assets.
Loyalty leaders thus lower their employee losses as low as possible. Surprise — the loyalty leader is also the profitability leader. Loyalty management metrics makes these analytical processes easy — and compatible with the financial systems that are currently used to allocate resources and run businesses. These new, simple metrics are designed to make the invisible loyalty factors visible. Once made, these metrics greatly aid decision making: A company will now clearly know which investments need to be made and which do not.
Another major key:Each loyalty-leading company has a very clear set of high-level values, values which are the foundation for a code of behavior that is close to the Golden Rule.
These companies demonstrate that loyalty to principles is the critical element of success, both short and especially long-term. They rigorously seek out customers, employees, and investors who demonstrate the highest character and integrity.
The Key Secret to Business Success The practice of carefully selecting customers, employees, and investors and then continuously adding value to all of them so that the company retains them long-term creates, over time, record growth and profits. Until now, this integrated approach and its measurement methods have been totally lacking in our short-term, profit-centered world. This is why the growth and future earnings of businesses has been so hard to predict. Loyalty management is clearly a paradigm whose time has come.
Its application can transform individual, team and organization-wide performance. Leadership Alliance provides customized loyalty systems development and guidance for organizations of all sizes. We offer focused support for your journey to greater loyalty, profits and success.
Frederick Reichheld - The Loyalty Effect (1990s) - Essay Example
The Loyalty Effect: The Hidden Force Behind Growth, Profits, and Lasting Value
Frederick F.Reichheld – The Loyalty Effect